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Trade setup for Sept 8: Nifty50 overheated? Key market cues before Wednesday's session

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Analysts say the 50-scrip benchmark appears to be entering a consolidation phase. Here's how the September 8 session is poised to start.

Trade setup for Sept 8: Nifty50 overheated? Key market cues before Wednesday's session
Indian equity benchmarks halted a three-day winning run as financial -- especially PSU banking -- and IT stocks dragged the market on Tuesday. Nifty50 finally showed signs of fatigue in the choppy session, as the market changed direction at least seven times following a positive start.
Gains in consumer goods shares, however, offered some respite to the bulls. Nifty Bank failed to sustain intraday gains to end down 0.3 percent.
So, what do the charts suggest for Dalal Street?
The index formed a reasonable negative candle on the daily chart with minor upper and lower shadows, suggesting tiredness in the market at the new highs, said Nagaraj Shetti, Technical Research Analyst at HDFC Securities. However, he said, the overall chart setup does not warn of any significant trend reversal.
Where does the short-term range lie?
Structurally, the 50-scrip index is stepping into a short-term consolidation phase and poised to take a dip towards 17,000, warned Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas.
The short-term range for Nifty50 is expected to be 17,000-17,500, he said.
Here are key things to know about the market before Wednesday's session:
SGX Nifty
At 8:07 am on Wednesday, Nifty futures trading on Singapore Exchange -- an early indicator of India's Nifty50 index -- were up 47 points or 0.27 percent at 17,426, hinting at a positive start ahead on Dalal Street.
Global markets
Asian shares retreated from six-week highs on Wednesday tracking a sluggish session in the US overnight amid concerns about slowing growth. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.26 percent in early hours. Japan's Nikkei 225 index reversed early losses and was last seen up 0.83 percent after revised GDP figures beat expectations for the world's third-biggest economy.
Overnight on Wall Street, two key indices suffered losses but the tech stocks-heavy Nasdaq Composite gauge managed to edge higher to a record high. S&P 500 E-Mini futures were up 0.09 percent in early Asian trade on Wednesday, indicating a cautious start ahead on Wall Street.
What to expect on Dalal Street
HDFC Securities' Shetti said the market appears to have switched to a consolidation mode with rangebound action. "The choppy movement with minor weakness could continue for the next one or two sessions before another round of upside bounce from the lows," he said.
Key levels to watch out for
Nifty50: Immediate support is placed at 17,250 and the crucial overhead resistance around 17,500, according to Shetti.
"The market has opened a consolidation range between 17,450 and 17,200 levels. Above 17,450, chances of the index hitting the 17,550 mark would be bright," said Shrikant Chouhan, Executive Vice President-Equity Technical Research at Kotak Securities.
Nifty Bank: 
For the next few days, focus needs to remain on the banking index, which has formed a complete reversal formation. "Buying strategy should be between 36,500 and 36,300, for which, one can keep the final stop loss at 36,000. On the higher side, 36,750 and 37,250 would be major hurdles," according to Chouhan.
FII/DII activity
Net outflow by foreign institutional investors from the Indian capital market stood at Rs 145.45 crore on Tuesday, and net sales by domestic institutional investors were at Rs 136.57 crore, exchange data showed.
Call/put open interest
There is a high degree of call open interest at the strike prices of 17,400 and 17,500. On the other hand, the maximum put open interest is at the strike price of 17,300, and next only at 17,000, NSE data shows. This indicates that resistance can be expected in the 17,400-17,500 band, and support comes in at 17,300, followed by 17,000.
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 (%)
CANFINHOME19,41,225618.63.94%44.25%
POLYCAB4,39,8002,405.203.32%36.77%
IRCTC17,50,4503,288.108.90%27.44%
IDEA55,36,30,0008.3514.38%26.13%
VOLTAS33,91,5001,186.655.51%23.13%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
NATIONALUM11,55,15,00095.3-3.05%-8.11%
DLF4,03,02,900335.9-3.21%-3.76%
LTI7,77,0005,418.15-0.90%-3.75%
COFORGE8,63,4005,188.60-2.22%-2.99%
NAM-INDIA36,57,600420.4-0.50%-2.62%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
SHREECEM1,76,05030,798.700.59%-1.80%
LUPIN93,60,200991.050.46%-1.39%
INDUSTOWER1,29,10,800243.958.45%-0.89%
IOC5,25,20,0001120.04%-0.82%
COLPAL28,10,1501,735.601.67%-0.78%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
INDIAMART2,11,9508,780.20-2.17%12.74%
MANAPPURAM2,40,96,000164.4-2.58%11.95%
TATACONSUM78,97,500870-0.42%10.99%
ASHOKLEY4,73,76,000120.75-1.23%7.65%
IPCALAB1,54,5752,500.05-0.15%7.13%
(Increase in open interest and decrease in price)
Stocks hitting 52-week highs
Forty two stocks in the BSE 500 index — the broadest index on the bourse — clocked 52-week highs, including Bharti Airtel, Asian Paints, HCL Tech, Nestle, Tata Consumer, Tata Elxsi, Titan, Wipro and UltraTech. Dabur, Brigade, Cummins, ICICI Prudential Life, Linde, Havells, Mindtree, Mphasis, Persistent and Voltas also hit the milestone.
52-week low
Only one stock in the BSE 500 universe hit a 52-week low: Ujjivan Financial Services.
Volatility gauge
The India VIX index — which measures the expectation of volatility in the market — eased 1.39 percent to 14.90 on Tuesday, having moved between 14.59 and 15.23 during the session.