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Trade setup for Oct 7: Will Nifty50 cross 17,900-17,950 hurdle before RBI policy?

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Shrikant Chouhan of Kotak Securities believes the market has completed one leg of correction, more of which cannot be ruled out for now. Here's how the coming session is poised to start on Dalal Street.

Trade setup for Oct 7: Will Nifty50 cross 17,900-17,950 hurdle before RBI policy?
Indian shares snapped a two-day winning run thanks to across-the-board selling on Dalal Street in the fag-end of Wednesday's session. Besides most largecap financial stocks, IT, pharma, auto and metal spaces pulled the market lower. Analysts now await the outcome of the RBI's scheduled policy review and the onset of the earnings season — both due this week.
What do the charts suggest for Dalal Street?
The 50-scrip index has formed a lower top on a short-term basis, and an engulfing top with a bearish connotation on the daily charts, according to Deepak Jasani, Head of Retail Research at HDFC Securities.
A weak advance-decline ratio suggests widespread profit-taking. "Even if the global markets show some recovery, Nifty could again run into profit taking after a small recovery," Jasani added.
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'Nifty not crossing the sturdy wall anytime soon'
Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel One, does not expect the Nifty50 index to cross "the sturdy wall of 17,900-17,950 anytime soon". All eyes on Thursday will be on global developments "because any further aberration would finally validate our recent stance" he added.
Crucial support for the 50-strong index is seen at 17,500-17,450 levels, a violation of the lower end of which would be the first sign of weakness. Any bounce towards resistance at the recent highs of 17,750-17,850 is expected to get sold into, according to Chavan, who expects high volatility for the time being.
Here are key things to know about the market before Thursday's session:
SGX Nifty
At 8:03 am on Thursday, Nifty futures trading on Singapore Exchange -- an early indicator of NSE's Nifty50 index in India -- were up 140.5 points or 0.8 percent at 17,769, suggesting a positive start ahead on Dalal Street.
Global markets
Equities in other Asian markets jumped tracking a late recovery on Wall Street overnight as US politicians appeared close to a temporary deal to avert a federal debt default and as Russia reassured Europe on gas supplies. MSCI's broadest index of Asia Pacific shares outside Japan was up 1.4 percent in early Asian trade, and Japan's Nikkei 225 index up 1.7 percent. China markets remained closed for a holiday.
S&P 500 E-Mini futures were up 0.6 percent, indicating a strong opening in the US on Thursday, a day after three main Wall Street indices rose 0.3-0.5 percent.
What to expect on Dalal Street
Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, believes the market has completed one leg of correction, with the 17,600 level now expected to act as sacrosanct support.
"The texture of the market is volatile, hence quick intraday correction from the resistance levels is not ruled out." For day traders, levels of 17,750-17,815 will now be intraday resistance, and key support at 17,600-17,540, he said.
Selling is quite visible on higher levels for both Sensex and Nifty50, said Rahul Sharma, Co-Founder of Equity99. He expects banking, chemical, textile and logistics spaces to be in focus on Thursday.
Key levels to watch out for
Nifty50: Equity99's Sharma expects the index to find support at 17,595, and next at 17,490 and 17,375, and face immediate resistance at 17,750, followed by 17,850-17,900 levels.
Bank Nifty: The banking index is expected to find support at 37,300-37,100-36,900 levels whereas resistance is placed in the 37,800-38,100 band, he said.
FII/DII activity
Foreign institutional investors (FIIs) pulled out a net Rs 802.8 crore from Indian equities on Wednesday. Net sales by Domestic institutional investors (DIIs) stood at Rs 998.7 crore, exchange data showed.
Call/put open interest
The maximum call open interest is accumulated at the strike price of 18,000, followed by 17,900 and then 17,800. There is a high degree of put open interest at 17,500, and then 17,400, NSE data shows.
This suggests immediate resistance at 17,800 for the index followed by the main hurdle at 18,000. Support comes in at 17,500.
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 (%)
BOSCHLTD1,43,50017,33011.42%26.55%
ONGC5,62,48,500167.952.60%22.44%
MARICO79,76,000565.951.23%13.74%
DALBHARAT2,97,0002,099.500.87%12.37%
DEEPAKNTR24,91,0002,892.057.88%12.30%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
ABBOTINDIA30,57522,200-4.70%-10.87%
NATIONALUM11,04,49,00096.5-6.13%-7.74%
VOLTAS27,85,5001,227.85-2.12%-6.16%
SIEMENS18,33,4252,195.55-2.49%-3.37%
IEX82,37,500631.25-0.72%-3.29%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
BRITANNIA11,72,2003,9380.93%-4.50%
COROMANDEL21,97,500863.84.03%-2.62%
UPL2,69,64,600729.051.57%-2.18%
BANDHANBNK2,48,77,800304.651.57%-1.45%
INDUSTOWER1,21,43,600310.750.19%-0.51%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
CROMPTON7,53,500477.55-1.96%30.66%
IPCALAB5,73,9752,267.05-3.56%19.25%
OBEROIRLTY9,87,000860.05-3.49%16.38%
RBLBANK2,29,39,000185.1-4.66%13.64%
GODREJCP48,56,0001,018-2.87%11.78%
(Increase in open interest and decrease in price)
52-week highs
Reliance Industries, Indian Oil, GAIL, ONGC, Coal India, NHPC, SBI Life, Tata Elxsi, Tata Chemicals, Voltas and PVR were among the 33 stocks in the BSE 500 universe that clocked 52-week highs. 
52-week lows
While no stock in the broadest index on the bourse hit a 52-week low, Sansera Engineering, Krsnaa Diagnostics and Triveni Enterprises were among the few scrips that hit the trough.
Volatility gauge
NSE's India VIX index — which measures the expectation of volatility in the near term — surged 5.7 percent to 17.3 on Wednesday, its highest closing level so far this month.
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