The markets reacted to the Union Budget on much-anticipated lines; it remained both positive as well as volatile as it reacted to one of the most important domestic events. The markets saw a strong opening following a positive overnight trade setup. As expected the session remained range-bound until the proposals started to roll in. The markets gave a positive reaction to the Budget that was clearly a growth-oriented one. However, volatility also made its presence felt. After the completion of the FM’s speech, the NIFTY made a sharp corrective move and pared all its gains to slip in the negative. After slipping over 300-odd points from the high, the Index recovered as many points in a V-shaped recovery. In the end, the benchmark index ended with a net gain of 237 points (+1.37%).
The way the NIFTY had resisted to the 50-DMA in the previous session, this time, it hated the up move near the 100-DMA. The 50-, and the 100-DMA currently stand at 17430 and 17640 levels. The markets are largely expected to continue with their advance; however, the level of 17640 is likely to show some resistance on a closing basis. If the NIFTY slips under any consolidation, the level of the 50-DMA should extend good support on a closing basis. Volatility declined drastically; INDIAVIX came off by 9% to 19.9775.
Nifty is likely to see a stable start to the day; the levels of 17600 and 17690 may act as potential resistance points. The supports come in at 17500 and 17410 levels.
The Relative Strength Index (RSI) on the daily chart is 50.23; it is neutral and does not show any divergence against the price. The daily MACD is bearish and trades below the signal line. A candle with a long lower shadow emerged; however, this has emerged after a minor pullback and holds little significance given the present technical structure of the charts.
The NIFTY has the most immediate resistance in form of the 100-DMA which presently stands at 17640. For this pullback to continue, the NIFTY will have to move past this level convincingly on a closing basis. On the other hand, if there is any consolidation, the 50-DMA, which is at 17430 may come in for support on a closing basis.
The risk-on setup is evident in the markets. It is recommended to avoid shorts as all up moves have been a result of fresh long additions as per the F&O data. Also, the shifting of the maximum Call OI for this week’s options expiry to 18000 levels has opened up some more room on the upside. So, while avoiding shorts, all consolidation/corrective phases may be used to make quality purchases. While staying highly selective, a cautiously positive outlook is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
