F&O: Tug of war on between bulls and bears; volatility to stay high till Budget

F&O: Tug of war on between bulls and bears; volatility to stay high till Budget

Nifty opened with a gap down and declined further towards the 13,700 level on Thursday, as selling pressure emerged all over the Street. However, some recovery was seen in the second half of the session and the index eventually closed with a loss of around 150 points. The index has continued to form lower top and bottom since the last four sessions. It also formed a Doji candle on the daily scale after forming four consecutive bearish candles, indicating a tug of war between the bulls and the bears near support zones.

The index may remain highly volatile ahead of the Union Budget 2021. As long as it remains below the 14,000 mark, every bounce could be sold into and weakness may be seen towards 13,700 and 13,500 levels, while on the upside, a key hurdle exists at 14,000 and 14,200 levels.

India VIX fell 0.41% from 24.39 to 24.29 level. A surge in volatility due to selling pressure and ahead of the Budget may keep the market volatile and limit the upside.

Since it is the beginning of a new series, options data lay scattered at different strike prices. On the options front, maximum Put open interest stood at 14,000 level followed by 13,000, while maximum Call OI stood at 14,500 followed by 15,000 levels. The options data suggested a wider trading range between 13,500 and 14,500 levels ahead of the Budget.

Bank Nifty opened with a gap down and remained consolidative for most part of the session, but witnessed a decent recovery in the second half. It closed with a gain of around 70 points. The index formed a bullish candle on daily scale, as it closed higher than its opening level, but has been making lower tops and bottoms for last four sessions. Now, if the index manages to hold above 30,500 level, then a bounce could be seen towards 31,000 and 31,250 levels, while on the downside support exists at 30,000 and 29,700 levels.

Nifty futures closed negative at 13,816 level with a loss of 1.19%. The trade setup looked positive in Havells, Axis Bank, Voltas, SBI, Cummins India, MGL, Bosch, Ultratech Cement, Concor and Colgate-Palmolive but weak in Bank of Baroda, McDowell, M&M Financial, PEL, Maruti, TCS, Mindtree, Infosys and Muthoot Finance.

(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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