Expiry Day Volatility Seen as Nifty Remains Rangebound: Analysts
On Wednesday, the Nifty 50 index managed to snap a three-day losing streak, 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. Analysts expect volatility on expiry day and advise watching for a breakout.
The Nifty 50 index has been stuck in a narrow range for the past few days, with little movement on either side. This stagnant movement has led to a mix of views among analysts, with some expecting a breakout while others are cautious about the near-term outlook.
According to market experts, the current range-bound movement is a result of the index’s failure to breach the 25,200 level, which has been a significant resistance point for some time. The 24,500 level, on the other hand, has been acting as a strong support level, with the index repeatedly bouncing back from it.
“The Nifty 50 index is stuck in a tight range, and it’s difficult to predict a clear direction at this point,” said Sameer Kalra, Head of Research at Kotak Securities. “However, we do expect increased volatility on expiry day, which could lead to a breakout in either direction.”
Kalra also pointed out that the index’s relative strength index (RSI) is currently neutral, indicating that it’s not overbought or oversold. This suggests that the index has room to move up or down, but the direction of the move is uncertain.
Another market expert, Vinod Nair, Head of Research at Geojit Financial Services, also echoed similar views. “The Nifty 50 index is likely to remain range-bound until it breaks out of the current range,” he said. “We may see increased volatility on expiry day, which could lead to a breakout in either direction. However, we recommend caution and advise investors to wait for a clear direction before making any significant moves.”
The expiry of the monthly options contracts is expected to bring increased volatility to the market, as it often does. The expiry of the contracts can lead to significant price movements, as traders and investors adjust their positions and hedge against potential losses.
In the past, the expiry of the options contracts has led to significant price movements in the Nifty 50 index. In February, for example, the index breached the 25,200 level on expiry day, while in March, it fell sharply due to a selloff in the technology sector.
Despite the uncertainty surrounding the near-term outlook, many analysts remain optimistic about the long-term prospects of the Indian equity market. The recent rebound in the global markets, coupled with the expected economic recovery in India, has led to a renewed sense of optimism among investors.
“The Indian equity market is likely to continue its upward trajectory in the long term, driven by the expected economic recovery and the rebound in the global markets,” said Kalra. “However, we do expect increased volatility in the short term, particularly on expiry day. It’s essential for investors to be cautious and wait for a clear direction before making any significant moves.”
In conclusion, while the Nifty 50 index remains range-bound, analysts expect increased volatility on expiry day. The index’s failure to breach the 25,200 level has led to a mix of views among analysts, with some expecting a breakout while others are cautious about the near-term outlook. Investors are advised to wait for a clear direction and be cautious of the increased volatility that is likely to come.
