By Chandan Taparia
The Nifty50 index failed to surpass the 11,000 mark and corrected sharply towards the 10,850 level on Wednesday. It traded in the deep oversold territory, but failed to surpass the resistance levels, causing selling pressure after the bounceback.
It is near its 50% retracement of the entire upswing from 9,952 to 11,760 levels. If Nifty does not respect the 10,850 level, then it may drift down towards the 61.80% retracement, which comes at 10,650. Now the index has to hold above 10,850 to witness a bounce towards 10,929 and 11,000 levels, while a failure move beyond the first hurdle and hold below 10,850 could open its downside towards 10,700 and 10,650 levels.
On the options front, maximum Put open interest was at 10,500 and 10,800 levels, while maximum Call OI was at 11,500 followed by 11,200 levels. Meaningful Put writing was seen at 10,700 and 10,500 levels while Call writing was seen at 11,000 to 11,300 levels.
The option band signified a shift in lower trading range with the immediate hurdle at 11,000.
India VIX moved up 7.60 per cent to 18.12. Volatility is not cooling down, which is not giving any relief and suggests a tight bear grip on the market.
Bank Nifty failed to surpass the 25,500 level and corrected towards 25,000. It has been consolidating between 24,700 and 25,500 levels for last six sessions. The index has to hold above 24,700 to attract support-based buying while 25,500 and 25,650 levels could continue to act as immediate hurdles.
Nifty futures closed in the negative at 10,880 with a loss of 1.64 per cent. Longs were seen in Vedanta, Hindalco, DCB Bank and Indiabulls Housing Finance while shorts were seen in Bata India, Jubilant Foodworks, Eicher Motor, M&M and Reliance Capital.
(Chandan Taparia is Technical & Derivative Analyst at Motilal Oswal Securities. Investors are advised to consult financial advisers before taking an investment calls based on these observations)