The Indian stock market indices, Sensex and Nifty 50, are likely to open on a flat note Tuesday following mixed global cues.
The trends on Gift Nifty also indicate a mildly positive start for the Indian benchmark index. The Gift Nifty was trading around 25,360 level, a premium of nearly 22 points from the Nifty futures’ previous close.
On Monday, the domestic equity market ended higher with the benchmark Nifty 50 clocking its 13th straight session of gains.
The Sensex rose 194.07 points to close at 82,559.84, while the Nifty 50 settled 42.80 points, or 0.17%, higher at 25,278.
Nifty 50 formed a small negative candle on the daily chart with minor lower shadow.
“This chart pattern is indicating a gradual upside momentum in the market with narrow range movement. The market has been surging higher recently with weak overall breadth. This is not a good sign,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
He believes the short-term trend of Nifty 50 is intact. Though, Nifty is placed at the hurdles of around 25,350 levels (1.382% Fibonacci extension), still there is no indication of any significant reversal pattern building at the highs. A decisive move only above 25,400 could open the next upside target of 25,800 levels.
Here’s what to expect from Nifty 50 and Bank Nifty today:
Nifty Open Interest (OI) data shows the highest OI on the call side at the 25,500 and 25,700 strike prices, and on the put side at the 25,000 strike price.
“This data, coupled with the overbought conditions, hints at a possible correction in the September series. Investors and traders can hold their positions and trail their stop loss (SL) for potential upside movement,” said Mandar Bhojane, Technical analyst at Choice Broking.
Nifty 50 continued the upmove with choppy movement on September 2 and Nifty closed the day higher by 43 points after hitting a new all time high at 25,333 levels.
“The Nifty failed to surpass the opening high after a positive start. Heavy call writing was observed at the 25,300 strike, and overall, call writers significantly outnumbered put writers throughout the day. In the near term, the trend might remain sideways to negative as long as it stays below 25,300,” said Rupak De, Senior Technical Analyst, LKP Securities.
However, on the lower end, he believes the correction may be limited to 25,000, where significant put writing has been observed.
Aditya Agarwal, Head of Derivatives and Technical at Sanctum Wealth is of the view that on the higher side, the Nifty 50 index will continue to find minor resistance around 25,300 - 25,350 levels and can profit booking from those levels.
“From current levels, risk reward ratio doesn’t support initiating fresh long positions in Nifty. However, the overall structure for the index remains bullish and 100 - 140 points kind of dip can be used to add long positions,” Agarwal said.
VLA Ambala, Co-Founder of Stock Market Today highlighted a trend seen in benchmark indices and large-cap stocks, that whenever the RSI enters the overbought zone, consolidation or correction tends to follow.
“Our market is currently experiencing this trend and is trading in an overbought zone, especially on the monthly frame, which is above 82. In this case, it is better to focus on undervalued stocks than those in the overbought zone, regardless of market cap. Despite the risk of a correction, the overall market remains in a bullish phase, which means any dip between 5% and 15% could be a potential buying opportunity,” Ambala said.
According to Ambala, the Nifty index can expect support levels around 25,200 and 25,120, whereas resistance will likely be between 25,340 and 25,400.
Bank Nifty index ended 88.55 points, or 0.17%, higher at 51,439.55 on Monday, forming a bearish candlestick pattern on the daily charts.
“Bank Nifty found strong resistance around its 50 DMA at 51,530 levels and thereafter continued to consolidate in a narrow band. A close above 51,500 can trigger a short covering move that can drive index towards 52,000 / 52,400 levels in the short term,” Agarwal said.
On the lower side, he expects the Bank Nifty index will find strong support around 51,240 - 50,950 levels.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
