F&O: Nifty range widens to 11,600-12,100; VIX must cool down below 19 for market stability

By Chandan Taparia

Nifty remained highly volatile as a roller-coaster ride was witnessed in between 11,800 and 12,000 zones, led by a sharp cut in mid-session followed by a smart recovery towards the closing hour. It tested the psychological 12,000 level in the first hour of the session but failed to surpass the previous swing high of 12,025 and drifted sharply towards 11,775 before closing near 11,950.

The index formed a Dragonfly Doji candle with a long lower shadow on the daily scale, indicating that declines are being bought in the market. Nifty continued its winning streak for the fourth consecutive session and managed to recover a big bearish candle made last Thursday. Overall, the price and data setup suggested that a bounce may be seen, but multiple hurdles and supply pressure at higher zones may restrict the upside momentum.


Now, Nifty has to hold above the 11,800-11,820 zone to witness an up move towards 12,100, while on the downside key support exists at 11,777-11,750 levels.

India VIX moved up by 0.99 per cent from 22.69 to 22.91 level. The volatility index needs to cool down below 19 for market stability but it might spike ahead of the US election.

On the options front, Maximum Put OI stood at 10,500 level followed by 11,000, while maximum Call OI was at 12,500 followed by 12,000. There was Call writing at strike prices 12,200 and 12,500 levels followed by Put writing at 11,900 and 11,700. Options data suggested a wider trading range between 11,600 and 12,100 levels and an immediate trading range between 11,800 and 12,100 levels.

Bank Nifty opened positive and headed towards the recent high of 24,823 but remained quite volatile during the day. It fell by around 700 points from an intraday high of 24,823 but later on witnessed a smart recovery of 600 points from 24,100 to close the session with a gain of more than 300 points. Bank Nifty has been making higher lows from the last four trading sessions and holding well above the previous hurdle of 24,000. It formed a bullish candle with long shadow on the daily scale, indicating that though both the bulls and bears were in a tussle but bulls were quite active and used any decline for buying opportunity. Now it has to hold above 24,250 to witness an up move towards 25,000 followed by 25,200, while on the downside support exists at 24,000 followed by 23,750.

Nifty futures closed positive at 11,928 level with a gain of 0.27 per cent. The trade setup was positive in Apollo Tyres, DLF, Power Grid, Bharti Airtel, Tata Steel, Hindalco, Concor, Grasim, HDFC Bank, Axis Bank, ICICI Bank, UltraTech Cement and Kotak Bank while weakness was seen in TCS, Reliance, Hero MotoCorp, Zee, HCL Tech and Wipro.

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