Technical bounce adds to volatility

After six consecutive days of trading lower, benchmark indices bucked the trend to end in positive territory. Both Sensex and Nifty closed the day with gains as worries surrounding  the trade war eased after it was reported that the US import tariff plan may spare select countries. Sectoral indices were mixed. While the healthcare, FMCG and metals indices traded lower on the NSE, gains of over 1 per  cent were seen in the banking indices.

The Sensex surged 318.48 points, or 0.96 per  cent, to settle at 33,351.57. while the Nifty rose 88.45 points, or 0.87 per  cent, to settle at 10,242.65.

The BSE Mid-cap and Small-cap indices rose 0.56 per cent and 0.50 per  cent, respectively. Both the indices underperformed the Sensex.

Technical View

Chandan Taparia, derivatives & technical analyst, Motilal Oswal Securities, said: “The Nifty index opened gap-up and finally managed to close positive after the decline of last six trading sessions. It formed a Bullish Hammer candle on the daily chart and RSI (relative strength index) indicator is turning from its deep oversold territory. (A Hammer is a bullish reversal pattern formed after a decline)

“It witnessed support based buying as well as short covering activities and now needs to hold above immediate resistance of 10,276 to witness an up-move towards 10,333 then 10,400 zones while on the downside supports are seen at 10,141 then 10,100 zones, which is near to its 200 DEMA (double exponential moving average).”

Market view

Jayant Manglik, president, Religare Broking, said: “The Nifty managed to end with decent gains amid volatility indicates a breather after the recent fall. It opened with an uptick but selling pressure at the higher level pushed the benchmark lower in no time. However, things improved as the session progressed, thanks to bargain hunting in select index majors after six days of consecutive fall.

“We feel it's just a technical bounce and sustainability at higher level seems difficult. Traders shouldn't jump into the trade and keep a close eye on local developments, mainly related to the PSU banking fraud and upcoming macroeconomic data for cues. The Nifty has immediate resistance at 10,300-10,400.           


Ashwin J Punnen