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Trade setup for Oct 22: Is the Nifty50 correction over? Key market cues before Friday’s session

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Nifty50 has formed a long negative candle with a lower shadow. What does this mean and how is Dalal Street poised to start on Friday? Read on...

Trade setup for Oct 22: Is the Nifty50 correction over? Key market cues before Friday’s session
Indian equity benchmarks extended losses to a third straight day on Thursday, dragged by IT, metal and consumer stocks. Sharp gains in financial shares kept the downside in check. The Bank Nifty index bounced 1.3 percent to a record high, closing above Mount 40,000 for the first time. Analysts await more India Inc earnings eagerly for cues.
What do the charts suggest for Dalal Street now?
The Nifty50 index has formed a long negative candle with a lower shadow, suggesting the emergence of buying interest from lows, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities. "This also signals a possible completion of a recent downward correction in the market," he said.
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All eyes on Bank Nifty
Barring banking stocks, Nifty50 constituents look weak, leading the correction in the market, according to Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel One. Banking counters came to the rescue of Nifty50 when it was about to knock the crucial support of 18,000, he said.
"Now two major indices (Bank Nifty and Nifty50) are showing complete divergence, so would be interesting to see whether the Bank Nifty lifts Nifty or vice versa. All eyes are on the banking space because a follow-up move from hereon will certainly lift the overall market sentiment," Chavan said.
Here are key things to know about the market before Friday's session:
SGX Nifty
At 7:45 am on Friday, Nifty futures trading on Singapore Exchange -- an early indicator of the Nifty50 index -- were up 24.5 points or 0.1 percent at 18,271, suggesting a positive start ahead on Dalal Street.
Global Markets
Equities in other Asian markets began the last trading day of the week on a largely weak note, with MSCI's broadest index of Asia Pacific shares outside Japan last seen trading down 0.1 percent.
S&P 500 E-Mini futures were down 0.1 percent in early Asian trade on Friday, hinting at a muted start ahead on Wall Street.
On Thursday, Wall Street hit yet another record high led by consumer discretionary and technology shares, as the S&P 500 index rose 0.3 percent to its highest close. The tech stocks-heavy Nasdaq Composite gauge rose 0.6 percent, but the Dow Jones Industrial Average finished flat. Gains in consumer discretionary and technology shares.
What to expect on Dalal Street
A positive closing on Friday could confirm a higher bottom formation, said HDFC Securities' Shetti. "A sustainable up move from here could eventually challenge the recent all-time high of 18,604 in the near term. Immediate support is placed around 18,150-18,050 levels," he said.
Key levels to watch out for
Nifty50: Crucial support for the index is placed at 18,060-18,000 and immediate hurdles at 18,260 and 18,400, according to Chavan. "Since the midcap index is still showing some weakness, traders are advised not to create aggressive longs in high beta counters. A thematic approach can still be followed, but one needs to be very selective," he said.
Bank Nifty: The banking index is expected to find resistance at 40,500-40,700 and support at 39,500-39,300, he said.
FII/DII activity
Foreign institutional investors (FIIs) pulled out a net Rs 2,818.9 crore
from Indian equities on Thursday. Net purchases by domestic institutional investors (DIIs) stood at Rs 428.5 crore, exchange data showed.
Call/put open interest
The maximum call open interest is at the strike price of 18,300, and the next at 18,700. On the other hand, the maximum put open interest remains at 18,000, NSE data shows. This suggests immediate resistance can be expected at 18,300, followed by 18,700, and support comes in only at 18,000.
Long build-up
Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:
SymbolCurrent OICMPPrice change (%)OI change (%)
CROMPTON14,68,500466.32.37%15.51%
KOTAKBANK1,00,38,8002,1526.33%13.45%
JKCEMENT1,00,8003,242.551.45%12.85%
SRTRANSFIN37,12,4001,500.704.05%12.11%
POWERGRID2,99,60,794195.950.41%11.89%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
TATAPOWER8,15,13,000226.1-2.29%-7.25%
INDUSINDBK1,38,48,3001,197.95-0.68%-6.53%
MPHASIS17,39,4003,400-2.12%-5.21%
DALBHARAT7,27,7501,970.10-0.40%-4.71%
L&TFH6,92,23,46885.8-6.28%-4.11%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
M&MFIN1,94,80,0001934.16%-3.98%
INDIGO34,32,0002,0521.63%-3.93%
COALINDIA5,61,58,200182.60.74%-3.69%
ABBOTINDIA34,60021,021.051.34%-3.61%
SUNTV1,20,12,000555.82.24%-3.12%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
GAIL4,06,68,700151.45-0.56%18.52%
ADANIPORTS8,69,62,500780.95-2.17%16.93%
POLYCAB10,67,7002,217.30-3.83%16.80%
BERGEPAINT42,82,300750-6.24%16.47%
VOLTAS21,54,0001,196.85-4.50%15.60%
(Increase in open interest and decrease in price)
52-week highs
ICICI Bank, Kotak Mahindra Bank, Union Bank, IRB Infra Developers and Indian Bank were among the 12 stocks in the BSE 500 universe that clocked 52-week highs.
52-week lows
No stock in the broadest index on the bourse hit a 52-week low. Recent debutants Aditya Birla Sun Life AMC, Krsnaa Diagnostics, Sansera Engineering and Windlas Biotech were among the 20 other scrips that hit the trough.
Volatility gauge
NSE's India VIX index — which gauges the expectation of volatility in the near term — eased 1.5 percent to 18.04 on Thursday.
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