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Thursday, April 22, 2021

F&O: Profit booking sets; major spike in VIX doesn’t augur well

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NEW DELHI: Nifty opened positive on Monday, but failed to surpass the 11,800 mark and fell sharply towards the 11,300 level. It corrected more than 450 points from its intraday high of 11,794 to 11,325 level, and closed the day with a loss of around 250 points. The index formed a big bearish candle and wiped out entire gains of last six sessions. In the process, the index formed a Bearish Engulfing pattern. It negated the formation of higher highs and lows of last six sessions with a decline in all the sectorial indices along with a very poor advance-decline ratio.

The index has also broken the immediate support trend line by connecting the recent swing lows, which do not bode well for the bulls from a short-term point of view. As long as it remains below 11,550 level, more decline due to profit booking could be seen towards 11,200 and 11,111 levels, while on the upside, key hurdles are seen at 11,650 and 11,750 levels.

India VIX moved up sharply due to fresh geopolitical tension as well as profit taking. India VIX moved up 24.44 per cent from 18.34 to 22.83 level. A spike in volatility from lower levels signals profit booking decline, but the overall lower VIX on a weekly basis can support the market at key levels after some more dips.

On the options front, maximum Put open interest stood at 11,000 level followed by 10,500, while maximum Call OI was at 12,000 followed by 11,500 levels. Marginal Call writing was seen at strike prices 11,700 and 11,500 while there was Put unwinding at all immediate strike prices. Options data suggested a wider trading range between 11,000 and 11,800 levels.

Bank Nifty opened positive beyond 25,000 level, but saw strong selling pressure of around 1,800 points from the intraday high of 25,200 to 23,400 levels. It formed an Outside Bar along with a Dark Cloud Cover pattern on the daily scale, which indicated that the bears are now attacking from higher zone after a decent rally in last two weeks. The index negated the formation of higher lows on the daily scale and lost most of its previous day’s gain. Now it has to cross and hold above 24,000 level for a move towards the 25,000-25,200 zone, while on the downside, key support exists at 23,200 level.

Nifty futures closed negative at 11,361 level with a loss of 2.69 per cent. The trade setup was positive in ONGC and TCS but negative in Bosch, Apollo Tyre, Aurobindo Pharma, Canara Bank, McDowell, ICICI Pru, Motherson Sumi, ACC, Ambuja Cement, Cipla and Manappuram Finance.

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