Expiry Day Volatility Seen as Nifty Remains Rangebound: Analysts
The Indian stock market wrapped up Wednesday’s trading session with a marginally higher close, snapping a three-day losing streak for the Nifty 50 index. While the rebound may have provided some relief to investors, analysts are cautioning that the index’s technical picture remains unchanged, with the broader market stuck in a tight range of 24,500 to 25,200. As the market approaches expiry day, volatility is expected to rise, and investors are advised to keep a close eye on any potential breakouts.
The Nifty 50 index, which tracks the performance of the 50 most liquid and widely traded stocks on the National Stock Exchange (NSE), has been trading within a narrow range for some time now. The index has struggled to break above the 25,200 level, which has been serving as a key resistance point, while the 24,500 level has been providing support. This lack of direction has resulted in a highly range-bound market, with prices oscillating within a narrow band.
Analysts are attributing the market’s range-bound behavior to a combination of factors, including the ongoing COVID-19 pandemic, which has been impacting the global economy, and the uncertainty surrounding the outcome of the US presidential election. “The market is in a wait-and-watch mode, and investors are hesitant to make big bets until there is more clarity on these two fronts,” said Rakesh Agarwal, a senior equity analyst at a leading brokerage firm.
Another factor contributing to the market’s lack of direction is the high level of liquidity, which has been driving prices up and down without providing any clear direction. “Liquidity is extremely high, and this is leading to a lot of choppiness in the market,” said Jayant Manglik, a technical analyst at a leading financial services firm. “Until we see a clear breakout or breakdown, the market is likely to remain range-bound.”
As the market approaches expiry day, volatility is expected to rise, and investors would do well to be cautious. Expiry day is the last trading day of the month, and it is typically a time when traders and investors look to square off their positions and adjust their portfolios. This can lead to increased market volatility, as traders and investors rush to buy and sell stocks to meet their obligations.
Analysts are advising investors to be watchful for any potential breakouts on expiry day, as these can have a significant impact on the market. “A breakout above 25,200 could lead to a significant rally, while a breakdown below 24,500 could lead to a sell-off,” said Agarwal. “Investors should be prepared for either scenario and keep a close eye on market developments.”
In conclusion, the Nifty 50 index remains range-bound, and analysts are cautioning investors to be prepared for increased volatility on expiry day. While the market’s technical picture may be unclear, a clear breakout or breakdown could lead to significant market movements. Investors would do well to stay informed and be prepared to adapt to changing market conditions.
