F&O: Buy on dips continues to lift market; low VIX aiding bulls

Nifty index opened with a gap up on Tuesday and after an early consolidation, it took support at 16,500 level and headed towards 16,647. The index escalated throughout the day by forming higher highs on the lower time frame chart and closed with a gain of around 130 points. The index formed a bullish candle on the daily scale with a long lower shadow, which indicates that declines are being bought into. Now it has to continue to hold above 16,600 level to extend the move towards lifetime high territory of 16,700-16,750 zone, while on the downside support is seen at 16,500 and 16,380 levels.

India VIX fell 3.60 per cent from 13.60 to 13.18 levels. A cool down in volatility from the recent swing highs has again given a buy on decline stance to the market and now VIX needs to hold below 12 zone to get more buying interest in the broader market.

On the options front, Maximum Put Open Interest stood at strike prices 16,500 followed by 16,000, while maximum Call OI was seen at 16,800 followed by 17,000. Call writing was seen at 16,800 and then 16,750 strike while there was meaningful Put writing at 16,500 and then 16,600. Options data suggested a broader trading range between 16,400 and 16,800 levels.


Bank Nifty opened with a gap up and moved northward throughout the day with the banking stocks outperforming the broader market. It touched high of 35,795 and closed with a handsome gain of around 600 points. It formed a bullish candle on the daily scale and negated its lower lows of the last four sessions. Now it has to hold above 35,500 zone to witness a bounce towards 36,000 and 36,250 levels, while on the downside support are seen at 35,300 and then 35,000 levels.

Nifty futures closed positive with a gain of 0.74 per cent at 16,616 level. Among specific stocks, the trade setup looked bullish in Bajaj Finserv, VEDL, Hindalco, Adani Ports, Naukri, Bajaj Finance, Tata Steel, TechM, Muthoot Finance, Cipla, Torrent Power, SBIN, HDFC Bank, Apollo Hospital, Sun Pharma, SBI Life, ICICI Bank, Siemens, LT and Reliance but weak in Dabur, HDFC, Glenmark, Pidilite Industries, Concor and Colgate-Palmolive.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)