Nifty resistance at 16400; use declines in Bank Nifty near 34800-34700 to add fresh longs in next 2 sessions

Nifty resistance at 16400; use declines in Bank Nifty near 34800-34700 to add fresh longs in next 2 sessions

By Sameet Chavan

An action-packed session was seen in our domestic market with a V-shaped recovery on the expiry day. The benchmark index Nifty 50 started the day with a gap up that soon got sold into, and it breached the psychological mark to test intraday lows of 15904 odd levels. However, the short covering in the mid session triggered a brisk rally that pared down all the initial loss, followed by the broad-based optimism that boosted the market sentiments and snapped the week’s selling spree. The Nifty concluded the expiry session at the day’s high with a gain of 0.90 percent.

Looking at the recent price action, we would like to reiterate not being complacent and staying abreast with daily developments across the globe. A strong leadership from major sectors could help gain momentum in the domestic market. Hence, traders should focus on thematic moves in the market from the next derivatives series.

The banking space led from the front and was a charioteer of pulling the benchmark from the challenging position to safer terrain. With this, Nifty Bank index has confirmed a breakout from the sturdy wall of 34700 – 34800 which coincides with the ’20-day EMA’. Hence, we expect the banking index to continue its northward trajectory now and move towards 35500 – 35800 in the next couple of sessions. This will certainly bolster the overall sentiments among the market participants. Traders are advised to trade with a positive bias and use any decline towards 34800 – 34700 to add fresh long positions.

Yesterday, we witnessed open interest reduction in both the indices which is the normal phenomena during the expiry day. Rollovers in Nifty and BankNifty stood at 79% and 85% respectively. We believe a decent amount of shorts have been rolled over in Nifty; as far as banking index is concerned, we have noticed open interest reduction MoM. FII’s index futures ‘Long Short Ratio’ has improved from 35% to 45% series on series, which is a positive development.

(Sameet Chavan is a Chief Analyst-Technical and Derivatives at Angel One. Views expressed are the author’s own. Please consult your financial advisor before investing.)