India’s benchmark Nifty bounced back sharply in today’s session after hitting a low of 11138 approx. The bounce back of 200 points was triggered due to short covering by institutional sellers. Nifty had successfully achieved the range low of the May contract, yesterday, after the index slipped below 11260, thus institutional traders covered their shorts in today’s session.
Is It A Buying Signal?
In the current scenario, institutional buyers must take control of the market for momentum buying to happen. In today’s session, although Nifty bounced back 200 points, institutional buyers were not present. Today’s closing at 11265 has created a window of opportunity for the buyers to regain control of the index. The sellers had taken control of Nifty around 11260 yesterday. If the market sustains above tomorrow’s range low, it might trigger a trend change and fresh buying will be triggered. Since the institutional sellers are still in the market, they will aim to break tomorrow’s range low. If tomorrow’s range low is broken, the 2nd leg of selling for the May contract will be initiated.
Today’s closing at 11265 has kept the market evenly poised. The implied volatility of specific strikes in the Put options will decide whether the fall will continue tomorrow or the trend will change. Institutional buyers might consider entering the market if tomorrow’s range low is not disturbed. Tracking the gamma –Vega covariance factor for both the Call and Put options is critical as Nifty is on the verge of a decisive move ahead of the election results on the 23rd of May.
Bank Nifty Options Data