Expiry Day Volatility Seen as Nifty Remains Rangebound: Analysts
The Nifty 50 index managed to snap a three-day losing streak on Wednesday, ending marginally higher. The rebound, however, did little to alter the broader technical picture as the index remains within a tight 24,500 to 25,200 range. As the expiry day approaches, analysts are warning of increased volatility and advising investors to keep a close eye on the market for a breakout.
The Nifty 50 index has been stuck in a narrow range for the past few weeks, with the index trading between 24,500 and 25,200 levels. The index has been unable to break out of this range, leading to a lack of direction and volatility. This lack of direction has resulted in a flat market, with the index trading in a tight range.
Despite the index’s inability to break out of the range, analysts are warning of increased volatility on expiry day. Expiry day is a day when options contracts expire, leading to increased trading volume and volatility. This is because traders are looking to buy or sell options contracts that are about to expire, leading to a surge in trading activity.
“In the short term, we expect heightened volatility on expiry day, especially in the Nifty and Bank Nifty,” said Deepak Jasani, Head of Retail Research at HDFC Securities. “The Nifty has been trading in a narrow range, and we expect this range to continue until the expiry day. After that, we may see a breakout either side, which could lead to increased volatility.”
Jasani also warned that investors should be cautious of the Nifty’s overbought conditions. The Nifty has been trading above its 50-day moving average, which could lead to a correction if the index fails to break out of the range.
Another analyst, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, also warned of increased volatility on expiry day. “The Nifty has been rangebound for some time now, and we expect this range to continue until the expiry day,” he said. “After that, we may see a breakout either side, which could lead to increased volatility.”
Vijayakumar also warned that investors should be cautious of the Nifty’s technical indicators. The Nifty’s RSI (Relative Strength Index) has been trading above the 70 levels, which is considered overbought. This could lead to a correction if the index fails to break out of the range.
Despite the warning signs, there are some analysts who are optimistic about the Nifty’s prospects. “The Nifty has been trading in a tight range, but we expect this range to break out soon,” said Rajesh Jain, Technical Analyst at Anand Rathi Securities. “The Nifty has been forming a bullish pattern, and we expect this pattern to continue.”
Jain also warned that investors should be cautious of the Nifty’s support levels. The Nifty has been trading above its 50-day moving average, which could lead to a correction if the index fails to break out of the range.
In conclusion, the Nifty 50 index remains rangebound, and analysts are warning of increased volatility on expiry day. Investors should be cautious of the Nifty’s overbought conditions and technical indicators, and should be prepared for a breakout either side. Despite the warning signs, there are some analysts who are optimistic about the Nifty’s prospects, and believe that the index will break out of the range soon.
