Momentum likely to drive Nifty above 23,500 as VIX eases post exit polls

The Nifty 50 had a blockbuster start on June 3, rallying over 3 percent to hit a fresh all-time high above 23,300 levels, decisively recouping all of the previous week’s losses. This surge followed exit polls indicating a strong victory for the NDA government for the third time. Strong buying was seen across sectors, except for pharma and IT, while volatility cooled down considerably, making bulls comfortable to drive the index to uncharted territory.

Given the momentum, the index is likely to inch towards 23,500 in the coming sessions, with immediate support at 23,000, followed by 22,750. However, as the chart shows a Hanging Man kind of pattern formation (though not exact) at the top, some profit booking and consolidation cannot be ruled out at current levels, experts said. The crucial support area is 22,500-22,400.

The Hanging Man is a bearish reversal pattern, occurring at the top of a trend.

The Nifty 50 opened with a robust gap of 800 points at 23,338, and the record high is 23,339, almost identical to the opening levels. Although there was some profit-taking during the initial hour, the market remained strong, ending at a new all-time closing high of 23,264, up 733 points or 3.25 percent, marking one of the biggest single-day rallies of the decade.

“The market witnessed a significant shift in activity, showcasing the catapult effect. From a technical standpoint, the 23,100-23,000 zone is expected to function as a crucial intermediate support area,” said Osho Krishan, senior analyst – technical & derivative research at Angel One.

Additionally, on the higher end, it’s worth noting that 23,500 is positioned close to the bullish territory on D-Street, suggesting a favourable market outlook, he feels.

However, it’s crucial to maintain caution as the outcome of the election on D-day holds immense significance for the market. Hence, he advised traders to avoid aggressive bets and keep booking profits, as the market may witness some wild swings on the verdict day.

The India VIX, the fear gauge, dropped 14.89 percent to 20.94, from 24.60 levels. Further decline in volatility may increase the confidence among bulls, keeping market sentiment positive.

The weekly options data also indicated that 23,500 is likely to be the next resistance for the Nifty 50, with immediate support at 23,000.

On the Call side, the maximum open interest was seen at the 24,000 strike, followed by 23,500 and 24,500 strikes, with maximum writing at the 24,000 strike, then 24,500 and 24,200 strikes. On the Put side, 22,500 still holds the maximum open interest, followed by 23,000 and 22,600 strikes, with maximum writing at the 23,200 strike, then 23,500 and 22,500 strikes.

Bank Nifty

Banks were the big drivers of the market, as the Bank Nifty surged 1,996 points or 4.07 percent to end at a new closing high of 50,980. The index has formed a small-bodied bullish candlestick pattern with a long lower shadow on the daily charts, indicating solid buying interest at lower levels.

Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas, expects the positive momentum to continue.

“The short-term target of 51,000 has been achieved. The next target is placed at the 53,960 – 54,000 zone as per the Fibonacci extension method. The level of 50,000 shall act as a crucial support from a short-term perspective,” he said.

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