Market witnessed a Correction

Nifty started the new week on a positive note, but it was soon corrected led by the IT stocks. The Banking space too then witnessed selling pressure and as a result, Nifty corrected towards 17720 around noon. The index recovered marginally from the lows but did not manage to recover much and it ended the day below 17800 with a loss of about half a percent.

The markets did not see any positivity in the first trading session as the indices corrected and traded with a negative bias throughout the day. Except for FMCG, all the sectoral indices ended in the red indicating a broad market sell-off. Technically, the Nifty index still continues to trade within a channel and the prices are yet to breach the resistance end. The FII also still continue with their bearish positions in the index futures segment with more than 80 percent of the positions on the short side. In the options segment, 17800-17900 call options witnessed decent open interest addition while the 18000 call still has the highest open interest.  Hence, until we see a breakout in the index from the resistance end and short covering by the stronger hands, the market is likely to oscillate within a range. The breakout will be seen above the 17900-17950 range which will be the trigger for the markets to rally higher.  On the flip side, 17700 followed by 17635/17570 will be seen as support levels. Until we see a price breakout above the resistance and short covering by FIIs in the index futures, traders should trade with a stock-specific approach and look for stocks that are showing resilience in such market conditions. 

Amongst sectoral indices, the Nifty IT index witnessed correction and the momentum readings on the daily chart have given a negative crossover indicating that the stocks from this sector might witness some profit booking in the near term. On the other hand, the banking index needs a breakout above the 41700-41800 range which could then result in this space resuming its uptrend.