Sustained selling pressure to cap Nifty in near-term at 21,800: Technical experts

The benchmark Indian indices opened gap-down on February 13 amid adverse signals from global markets. The higher inflationary readings announced in the US, potentially deferring the rate cut cycle further, triggered a rush to book profits in the S&P 500 that led to a 1.5 percent correction. This consequently pushed the volatility index CBOE VIX reading from 13 to 16.

Selling pressure continued to rule the market, with the Nifty likely to show some weakness below 21,700 levels and finding support at the 21,450 and 21,500 zones.

At 9:32am, the Sensex was down 690.59 points or 0.97 percent to 70,864.60, and the Nifty was down 194.10 points or 0.89 percent to 21,549.20.

“The 21,000 PE and 22,000 CE drew the highest Open Interest. Fresh Open Interest additions were noted at 21,500, 21,600, and 21,700 puts, while unwinding in calls was observed at 21,600 to 21,900 strikes. A PCR of 0.99 at an IV of 15.1 (0.8 percent) suggests negative positioning in Nifty,” Akshay Bhagwat, senior vice-president of derivatives research at JM Financial, said.

“The Nifty finds its supports placed at 21,450-21,500 and is weak until below the 21,700 level,” he added.

To provide insight into whether the market has reached its peak, Rohit Srivastava, founder of Strike Money Analytics and Indiacharts, said: “My sense is that the high we made in January, which was retested in February around 22,127, is probably a top for a while. We have started witnessing a correction in both stocks and sectors, lasting at least one to three months because seasonally, January to March tends to be a weak period for the market. During this phase, you typically see bouts of volatility with buying and selling. That is the first thing to be aware of.”

He advises traders to prepare for meaningful retracements, noting that the market may have topped at 21,800. “It may not be easy to trade because people have become accustomed to being long only. We anticipate a short-term bounce, but it may not last very long. I don’t think we will go much above 21,800, and possibly, we may start seeing selling again from there. Eventually, we may head sub-21,000, perhaps even to 20,300 or 20,200 in the weeks ahead.”

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