Indices recover from day's low; Dow Jones Future display strong gains!

Market Update at 01:10 PM: The key benchmark indices have trimmed their losses in the last half an hour amid Dow Jones Future trading with gains of 0.75 per cent.   

Hindustan Unilever, Infosys, and Asian Paints are seen contributing to the recovery of Nifty. On the other hand, HDFC twins and ICICI Bank are putting pressure on the index.   

The broader market is still reeling under selling pressure with Nifty Midcap 100 and Smallcap 100, slipping over a per cent each.   

Market Update at 10:45 AM: The bears continued to dominate on D-Street as on Tuesday, Nifty & Sensex plunged more than half a per cent. The broader markets, which were seen relatively outperforming the frontline indices in the last trading session, are today seen underperforming; as a result, the market breadth is in a bad shape.  

On the options' front, the 15,700 call option has added more than 38.7 lakh shares in the open interest in today’s session itself. With this, the total open interest in 15,700 call stands as 53.39 lakh shares, which is the second-highest while the highest open interest stands at 15,800 call option.   

India VIX, also known as the ‘fear gauge’, has been on a declining trajectory since May, touching the lower levels (which we saw during early 2020), indicating that market participants have turned complacent. And when market participants become overconfident & complacent, it’s a big problem as they are more vulnerable to surprises.  

This is exactly what we saw on D-Street on Monday, a gap-down opening as market participants were in a panic mood and started selling. As a result, Nifty witnessed its one of the nastiest falls in recent times. Moreover, India VIX witnessed a sharp spike.    

What caused a gap-down opening on Monday? Firstly, it was fragile global cues, and secondly, prominent private sector bank. HDFC Bank reported its quarterly number on weakened fanned flames of asset quality. As a result, Bank Nifty was down by 1.88 per cent. Furthermore, HDFC twins combinedly contributed 76 points to Nifty’s fall.  

The price action of the day formed a Doji-like candlestick pattern with a gap-down opening. Nifty opened below the 20-DMA and during the day, it made an attempt to reclaim the 20-DMA but failed to sustain above the 20-DMA as selling pressure intensified. As Nifty slipped below the 20-DMA on a closing basis, the short-term trend has tilted in favour of bears. Having said that, Nifty is still trading within the broad range in which it has been trading for the past one month.   

Going ahead, the zone of 15,600-15,650 is likely to act as strong support. Hence, as long Nifty does not close below 15,600-15,650, bulls would stand a chance to bounce back. On the upside, the 20-DMA is likely to act as immediate resistance.