Volatility may rise on F&O expiry

The domestic markets sharply declined after a positive opening. The rise in the Dollar index, Rupee decline has dented the sentiment. The NSE Nifty closed at 17,646 points with a loss of 176.30 points. All the sectoral indices closed with a negative bias. The Metal and PSU Banks are the worst hit in Wednesday's market, with a 2.98 per cent and 1.94 per cent decline, respectively. The Pharma and IT indices also declined by 1.87 per cent and 1.32 per cent, respectively. The remaining sectoral indices declined by over half a per cent. The India VIX is up by 5.7 per cent to 17.33. The Market breadth is extremely negative as 1293 declines and 693 advances. About 133 stocks hit a new 52 week high, and 179 stocks traded in the upper circuit.

The NSE Nifty has formed a bearish engulfing candle. It took support at very close to 20DMA. As it closed below the prior day low, today's high is a lower high for all practical understanding. Unless it moves above 17,885 points, the uptrend is under pressure. For the second consecutive day, the Nifty faced stiff resistance at the upward channel demand line. For Thursday, the 20DMA (17599) will act as a crucial support level. The Nifty declined over 240 points from the day's high. The 17452-17373 zone will act as a key support zone for future price action for the next two days. A close below 17373, is nothing, but a lower low formation. In this case, the Nifty will form a lower high and lower low, which is a trend reversal sign. The sharp decline has erased all the bullish strength in the market. FIIs unwinded the long positions, and Nifty has registered a distribution day. All most every sector suffered from the fall, and the market has been extremely negative. The RSI has once again declined below the 60 zone, and further decline below 58 is a weaker signal for the market. The distance between the MACD line and the signal has increased and shown the bearish momentum's strength. The immediate support is 20DMA of 17599. As the weekly derivatives expiry, the volatility may further increase tomorrow. On a 75 minutes chart, the MACD has given a sell signal, and the price closed below the MA ribbon, which is negative.

(The author is financial journalist, technical analyst, family fund manager)