Technical View | Nifty forms High Wave candle on budget day amid high volatility

The index remains in a sell-on-rise mode. Immediate resistance is at 17,700-17,750 and support is at 17,400, Rupak De of LKP Securities has said

The Nifty saw some wild swings on February 1 as Finance Minister Nirmala Sitharaman presented the budget for financial year 2023-24. It came within touching distance of 18,000 only to wipe out most of the gain in a massive selloff in the last couple of hours.

The Street seemed to cheer the Budget’s higher-than-expected capital investment outlay of Rs 10 lakh crore, and changes in personal income tax slab, which are expected to boost demand, while exhibiting fiscal prudence but a sharp selloff in Adani group stocks dampened the sentiment.

After going past the 17,900 mark early in the session, the index slipped to 17,353 in the last hour of trade but managed to recoup losses to close 46 points downs at 17,616. The index defended its 200 daily exponential moving average (DEMA) for the fourth day in a row, which can be crucial support in the coming sessions. The level of 17,700-18,000 can be the next hurdle, experts said.

The index formed a bearish candle with a big upper and lower shadow, which resembles High Wave pattern on the daily charts, indicating too much volatility in the market and indecisiveness among buyers and sellers about the future market trend.

“The bears continued to be at the helm, and the index witnessed selling pressure in the second half of the session. The index remains in a sell-on-rise mode with immediate resistance at 17,700-17,750,” Rupak De, Senior Technical Analyst at LKP Securities said.

The immediate downside support level is 17,400, and a breach can lead to further selling towards 17,200-17,000, he said.

On the options front, the maximum Call open interest was at 18,000 strike followed by 18,100 strike, which is expected to be crucial resistance for the Nifty, with Call writing at 18,000 strike then 17,800 strike.

The maximum Put open interest was seen at 17,000 strike followed by 17,500 strike, which can be critical support area, with minor Put writing at 17,500 strike then 17,200 strike.

The options data indicates that an immediate trading range for the Nifty could be 17,350-17,900.

India VIX, the fear index remained volatile before closing 0.56 percent lower at 16.78 level.

Banking index

The Bank Nifty was highly volatile during the day and moved in a 2,500 points range. It settled 142 points lower at 40,513 and formed a bearish candle on the daily charts with long upper and lower shadow, resembling High Wave pattern.

“On the daily chart, the index has sustained below the 50 EMA (42,081). The sentiment is likely to remain weak as long as it remains below 41,150. On the lower end, support is placed at 39,500-38,800. On the higher end, resistance is visible at 41,150,” Kunal Shah, Senior Technical Analyst, LKP Securities, said.

A positive setup was seen in Indian Hotels, JSPL, ITC, Apollo Tyres, Polycab, SRF, Tata Steel, TCS, Godrej Consumer Products, JSW Steel, HDFC, HDFC Bank, Infosys, Eicher Motors, Havells and L&T, Chandan Taparia, VP | Analyst-Derivatives at Motilal Oswal Financial Services said.

However, weakness was seen in Adani Enterprises, Adani Ports, Ambuja Cements, Max Financial, ICICI Prudential, HDFC Life, SBI Life, Bank of Baroda, ACC, Jubilant Foodworks, SBI, IndusInd Bank, Container Corporation, and HDFC AMC, he added.

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