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Nifty Reaches Near Important Support Post Recent Correction

The indices recovered from the lows in the last hour of the trade and Nifty ended around 16750 with gains of about a quarter of a per cent

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The volatility continued to remain high amidst all the news flows on the Adani Group. The Banking stocks too witnessed a sharp downfall at the start of the week. However, the indices recovered from the lows in the last hour of the trade and Nifty ended around 16750 with gains of about a quarter of a per cent.

Our markets have witnessed increased volatility since last week post the news flows on the Adani group companies. Nifty corrected from the high of around 18200 and almost tested the 17400 mark today, in just four trading sessions. Now, post this sharp correction the momentum readings on the lower time frame charts reached the oversold zone and hence, we witnessed a pullback move towards the end. India VIX is trading above 17 levels indicating an increase in volatility. Hence, it seems that the market now has light positions ahead of the Union Budget event as the broader markets have corrected sharply in the last few sessions. Thus, the event could be a major trigger for the next directional move.

The global markets have been doing well recently but the FII’s selling in the Indian markets has been a cause of concern. They have been selling in the cash segment and have formed shorts in the index futures segment too which has mainly led to our market's underperformance. Whether they continue with their negative approach or cover the short positions around the event need to be seen. If we look at the daily chart, Nifty seems to be trading in a falling channel and Nifty bounced from the support end of the pattern on Monday. On the flip side, the resistance end is around 17750-17800 followed by the 17900-18000 range. This seems to be the broad trading range for the Nifty going ahead.

Hence, post the recent correction, one can look for stock-specific buying opportunities on dips as any positive trigger in the budget could lead to an up-move in the near term.  However, one should avoid aggressive/leverage positions till the volatility settles down and trade with proper momentum management.

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Ruchit Jain

The author is Lead Research,

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