Why Nifty Tanked 100 Points
India’s benchmark Nifty tanked 100 points today with less than 24 hours to go before the first phase of Lok Sabha elections starting tomorrow. The index faced stiff resistance around 11735 and achieved the downside target of 11688 approx due to a spike in options vega. India Vix also has scaled above 21, due to the uncertainty surrounding the election outcome. Although Nifty has tanked 100 points, Institutional traders, have not been built fresh short positions in today’s session.
Outlook For Tomorrow
In a surprising move, India Vix climbed above 21 ahead of the 1st phase of Lok Sabha elections. The rise in options vega helped Nifty achieve today’s downside target of 11688 approx. Option greek calculations are indicating that the market is expecting the Modi Government to be voted to power for a second term. Due to the rise in India Vix, the Gamma -Vega covariance factors of both Call and Put options have settled marginally higher than the binomial price. Tomorrow’s options gamma will decide the direction of the market. Going forward, if the index sustains above tomorrow’s range low and breaks the range high it might scale up till 11765 approx. On the other hand, if Nifty breaks tomorrow’s range low, the nearest downside target will be around 11595 approx.
In the hourly session, Spot Nifty has closed around 11584 approx. The index is likely to find resistance around tomorrow’s range high. The nearest downside target for the index is around 11563 approx. If Nifty trades above the hourly range high, it might scale up to 11631 approx.
Bank Nifty Options Data