Banking counters triggered the expected pullback today with both the benchmark indices going up by around 6.5 per cent on short covering and fresh long build-up. ICICI Bank was the star performer today, going up by 17.3 per cent. In October futures, it added an open interest of 3.2 million shares at the close today as renewed buying took place on the expectation that the stock will do well going forward.
After today’s pullback, market expects benchmark indices to consolidate in the coming days with the Sensex revisiting its earlier support level of 12,000. The corresponding target for the Nifty is around the 3800 levels. The F&O data suggest that traders expect the Nifty to touch the 3800 levels as options players were seen buying 3600-3800 strikes calls and booking profit at 3600-3800 puts.
Technical analyst Ashish Shroff of Ambit Capital expects the Nifty to trade in the 3200-3800 range where the index may retest the last week’s lows. Analysts believe that this could be the last few weeks of bottom formation where downside could be limited below the 3200 levels. At current levels, analyst expect the rise to be extremely sharp with an upside resistance at 3800.
The market was in extreme panic last week which led all the momentum indicators to their historical oversold levels with a relative strength index (RSI) of 24 for the first time after September 11, 2001. The five-day RSI falling to new lows, according to analysts, is a clear bullish sign in the medium to long term.
The Nifty October futures added open interest of 3.35 million shares intraday at an average of 3482. But it settled at 3534, while open interest declined by 0.55 million shares indicating short covering.
