Domestic indices reversed the recent downward trend, starting the month of March on a positive note. NSE Nifty 50 surpassed the crucial 17400 level, rising 116 pts or 0.67% to 17,420.15; and BSE Sensex surged 370 pts or 0.63% to 59,331.38 in the intraday trade on Wednesday. Banking index Bank Nifty soared 333.90 pts or 0.83% to 40,602.95. The benchmark indices have been falling for the past eight sessions but recovered today, as the market looked oversold, analysts said. Markets also took cues from Asian peers as economic activity resumed in China.
Why Nifty, Bank Nifty are rising today
Market looking extremely oversold
“We are seeing a relief rally in the market because the market is looking extremely oversold in the near term because the long exposure of FIIs in index futures stands at a multi-month low of 15%, the put/call ratio is at 0.67, and the reading of the RSI on the daily chart is at 30. On the upside, 17450 is an immediate hurdle, and then 17625 and 17750 are the next hurdles. On the downside, 17130 is an immediate support level, while 16800 is a major support for the Nifty. Banknifty is showing signs of bottoming out, as we can observe a double bottom formation with a bullish engulfing candlestick formation near its 200-DMA. On the upside, the 20-DMA around 41000 will be an important hurdle. On the downside, 39400 is a key support level,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Nifty completed its one-month corrective action from the budget day high
“Nifty 50 has completed its one-month corrective action from the budget day highs of 18,100 levels and has withheld the 200-day average with positive momentum. We expect the trend to continue till 17,700 levels over the next few days. Oversold levels and support of average confirm the trend,” said Vikas Jain, Senior Research Analyst at Reliance Securities.
Most Bank Nifty stocks trading above their respective 200 DMA
“Nifty’s two days of slippage past its 200 DMA failed to trigger substantial falls, encouraging traders to cut short bets. Meanwhile, the majority of Nifty Bank stocks are trading above their respective 200 DMA keeping upside hopes intact,” said Anand James, Chief Market Strategist at Geojit Financial Services.
Nifty broke out of downward sloping channel indicating bounce-back
“On the hourly charts, we can observe that Nifty has broken out of a downward sloping channel which indicates that a bounce is possible after falling for eight consecutive trading sessions. Also, the hourly momentum indicator has a positive crossover. Thus, both price and momentum indicators are in sync and we can expect the Nifty to target levels of 17500 from a short-term perspective,” said Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas.
Better relative strength in Bank Nifty compared to Nifty highlights bullish divergence
“Yesterday was the 6th such occurrence in the last 27 years that the index saw 9 consecutive red bars, and in the last 5 instances it has been preceded by an instant reversal of 4-5%. Furthermore, in the previous trading session index triggered a bullish AB=CD Harmonic pattern potential Reversal zone. Also, in the last two sessions we have seen better relative strength in Banknifty compared to Nifty which highlights bullish divergence among the indices and hints at exhaustion in the selling pressure,” said Rohan Shah, Head Technical Research at Stoxbox.
Traders advised to remain cautious
“Traders should remain cautious this would be a short covering rally after the continuous sell-off. We expect the Nifty to respect the 17100-17200 zone thus the possibility of consolidation is high. Considering stock-specific opportunities based on sectoral trends would be vital,” said Om Mehra, Equity Research Analyst, at Choice Broking.
If Bank Nifty closes above 40528, a target of 40950 looks possible
“After a heavy sell-off since the past 8-9 days and a below-par GDP growth data is factored in, expectedly Nifty and Nifty Bank have bounced back today with small gains as both looked oversold on the Daily charts. If Nifty Bank closes above 40528, a target of 40950 looks possible by this week. Support will be at 40380. Nifty has support at 17255. A daily close above resistance of 17451 could lead to a target of 17620 in the near term,” said A R Ramachandran from Tips2trades.