Options data indicates 16,500 may act as good support for Nifty!

Market Update at 02:00 PM:  Nifty recovers 120 points from the day’s low and now, it is comfortably trading above 16,500 level with gains of 0.47 per cent. Heavyweights like TCS, Reliance Industries, and HCL Tech have combinedly added 47 points to Nifty’s kitty.   

The broader markets continue to underperform as Nifty Midcap 100 and Smallcap 100 are down by 0.28 per cent and 1.33 per cent, respectively.   

On the options' front, the 16,500 Put option sees huge addition of open interest on Monday as nearly 24.86 lakh shares have been added. So, the total open interest at the 16,500 Put strike has reached 60.2 lakh shares while 16,500 Call Option strikes total open interest added 66.65 lakh shares. 

Market Update at 11:55 AM: The key benchmark indices recovered from the day’s low on Monday and were seen trading in green. Nifty and Sensex added 0.26 per cent & 0.35 per cent, respectively.   

Among sectoral indices, the majority of the indices were seen trading in the red. Nifty IT and Nifty Pharma were seen leading the chart as Nifty IT surged 1.93 per cent. Meanwhile, Nifty FMCG entered into negative terrain and Nifty Realty emerged as the top loser.   

On the options' front, Nifty 16,500 Call option strike has added over 16 lakh shares in the open interest on Monday itself. With this, the total open interest at 16,500 Call option stands at 66.49 lakh shares.   

Market Update 10:15 AM: After a blistering start to the week, the key benchmark indices have trimmed their early gains and were seen trading with gains of nearly half a per cent.   

Among the sectoral indices, Nifty IT and Nifty Pharma were seen leading from the front. On the flip side, Nifty Auto and Metal have lost 0.22 per cent & 0.16 per cent, respectively.   

Though the benchmark indices were trading in the green, market breadth remains weak as Nifty Smallcap 100 index has lost 0.83 per cent while Nifty Midcap 100 added 0.09 per cent.   

Meanwhile, the debutant, Nuvoco Vistas witnessed a disappointing list as its stock price is currently trading below the issue price.   

Last week, Nifty hit new all-time highs for three consecutive sessions. However, profit-booking emerged at higher levels, and it slipped lower to halt one of the longest winning streaks. On Friday, Nifty witnessed a gap-down opening, though it recovered from the lows of the day, but added distribution day count of Friday. With this, the distribution day count reached four. On a weekly basis, Nifty ended down by 0.48 per cent. Though the frontline gauge shed less than 0.5 per cent in the last week, sell-off in broader markets was once again the talk of the town. Nifty mid-cap and small-cap indices lost 1.72 per cent and 3.42 per cent, respectively.  

On analysing Nifty Smallcap index chart, we found something interesting! From the high of 10,673.55, Nifty Smallcap index went on to touch a low of 9,780.35. As a result, it moved down approximately 8.37 per cent from the highs. Was it the first time in recent times that the small-cap index had witnessed such a fall?   

The fall, which was witnessed during March 2021, was one of the most extensive ones in percentage. During the month of March, the index had witnessed a fall of 8.65 per cent. In the current phase of correction, though the small-cap index slipped below the 50-DMA, it’s important to watch the slope of the moving average. The slope of moving average is still flat to upward; hence, it’s not a big cause of concern. Furthermore, the current downmove of the index halted near the 61.8 per cent Fibonacci retracement of the recent upmove.  In addition to this, if the current swing low of the index does not breach, it would result in the formation of a double bottom pattern with a neckline placed at 10,300 mark.   

Nifty Midcap index is trading near the lower band of the rising channel pattern. As long as it manages to hold above this rising channel, there is hope for a bounce-back in the index. The level of 26,600-26,700 would remain crucial to watch out for on the Midcap index.   

The volatility index, after multiple attempts, managed to move above the 14-mark. A move above the 14.5 mark would indicate that the market participants are turning nervy. The level of 16,150 is likely to act as a crucial support level for the index in the near term.