market analysis: F&O: Rising VIX not a good sign; Nifty range seen at 14,000-14,600


Nifty opened positive on Monday, but failed to surpass the immediate hurdle at 14,500 level and drifted towards the 14,218 mark. The index started to form lower tops and bottoms and witnessed a decline due to profit taking for the third session in a row. The index closed the session near the lowest point of the day by forming a bearish candle on the daily scale and broke its rising support trend line.

The index may remain highly volatile ahead of monthly F&O expiry and the Union Budget 2021. As long as Nifty remains below 14,400 level, weakness could be seen towards 14,100 and 14,000 levels while, on the upside key hurdles exist at 14,500 and 14,600 levels.

India VIX moved up 3.68 per cent from 22.42 to 23.24 level. Volatility needs to cool down below 20 level to help the bulls get a grip. However, volatility could be comparatively higher ahead of Budget 2021 and that may sustain the volatile swings and limit the upside.

On the options front, maximum Put open interest stood at 14,000 level followed by 14,200, while maximum Call OI was seen at 15,000 followed by 14,500 level. Call writing was seen at strike prices 14,400 and 14,500 while there was Put writing at 14,200 and 14,100 levels. Options data suggested a wider trading range between 14,000 and 14,600 levels, while the immediate trading range is seen between 14,100 and 14,400 levels.

Bank Nifty opened positive, but failed to surpass its key hurdle at 31,750 level and drifted towards the 31,000 mark. It slightly outperformed Nifty, as it closed flat to positive even after seeing a sharp decline in the broader market. The index has been making lower tops and bottoms on the shorter timeframe charts and bounces are getting sold into. Now as long as the index remains below 31,750 level, every bounce could be sold into for a downside move towards 30,750 and 30,500 levels, while on the upside hurdles are seen at 31,750 and 32,000 levels.

Nifty futures closed negative at 14,254 level with 0.87 per cent loss. The trade setup looked positive in Grasim, Aurobindo Pharma, TVS Motor, Apollo Hospital, UPL, Cipla, Hero MotoCorp, Bajaj Auto, Sun Pharma, Pidilite Industries, Axis Bank and ICICI Bank but weak in RIL, Escorts, Indiabulls Housing Finance, HCL Tech, BHEL, IndusInd Bank, IndiGo, Berger Paint, RBL Bank, Biocon, HPCL and BPCL.

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





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