Below are the four main reasons that helped the Nifty 50 Index to close 1.37% up at 17,599.15 in the previous week.:
1) FII buying,
2) Higher direct tax collection in FY23,
3) Strong manufacturing PMI data and the
4) RBI’s decision to pause the rate hike
What India VIX is telling us now
Chart of India VIX (Since its beginning)
This week, INDIA VIX closed after falling to 11.80 from the 12.93 level; One can see with the help of the chart below, it is resting at one of its lowest levels of the near past. And all the traders know very well that any spike in the INDIA VIX can have a significant impact on them.
How India VIX Impacts Traders:
When VIX is high:
When VIX is high, the pricing of Out of Money options premiums increases significantly as traders expect an increase in market volatility. This means that as an options trader, one will have to pay a higher premium for an Out of Money options contract.
When VIX is Low:
When VIX is low, the pricing of Out of Money options premiums decreases significantly as traders expect a decrease in market volatility. This means that as an options trader, one will have to pay a lower premium for an Out of Money option contract
Nifty 50 Index Daily Chart
As expected in our previous technical journal, we mentioned that if FIIs agreed to take a loss, they would have to reduce their Index Future positions, which will convert into a strong bullish rally because in that case, all option sellers would unwind their long position. And it happened exactly. The Nifty index gradually starts its head upwards.
Have a look at how many positions are reduced by FIIs in the previous week. Within 3 trading days? They reduced their future position from 135.1k to 106.3k. And this is a significant number.
But remember, they still have a good number of Future index short existence, and as a big player, they can make more if the market moves higher further anytime soon.
Nifty 50 Index Weekly Chart
In the weekly chart, one can see that the Nifty 50 Index has started moving all the support moving averages, which shows strength on an ultra-short-term basis.
Nifty 50 Index Monthly Chart
The Nifty 50 Index monthly chart started showing a green candle, after 3 monthly red candles and a Doji candle in the previous month. It seems this leads to a green candle in the month of April 2023.
Outlook for the NIFTY 50 Index for Coming Week starts from 10th April -2023
The coming week, Friday, is again a trading holiday, hence once again we are heading towards another truncated weak.
The market close higher for the fifth consecutive session on Thursday, April 6th, the last training day of the previous week, after the Reserve Bank of India, surprised the Street by leaving interest rates unchanged.
The previous weekly closing had seen the NIFTY closing the 50-Week Moving Average, which was at 17328; and also the index has moved above this point.
As per the technical chart, the benchmark Index has also moved above the falling trend line that was posing resistance; however, the index remains within the intermediate falling channel that it has created for itself.
we will need to keep a very close eye on volatility. The INDIA VIX is at one of its lowest levels again; this not only reflects the complacency of the market participants but also leaves traders exposed to violent profit-taking bouts from the higher levels.
Support Level for the Coming Week for NIFTY:
As per technical charts, we can see the border support coming from the level of 17480 and it breaks decisively, then 17350 is the next support level to be watched.
As per the pivot chart, the Nifty-50 index may get support at 17,528 followed by 17,496 and 17,444.
Resistance Level for the Coming Week for NIFTY:
We can see the broader resistance level could be 17700, followed by 17865.
As per the pivot chart, If the index advances, 17,632 is the initial key resistance level to watch out for followed by 17,664 and 17,716.
The broader market outperformed the benchmarks, as breadth remained positive for yet another session.
Start protecting profit, because any side move in the market will kill the trader's profit on either side because India VIX could not be in favor of traders, in near future.
Especially, we need to understand that the upside is limited as of now.
Only the result season (about to start) could become a consolidation phase for the market before any move.
Thanks for reading.
Neeraj Bhatia (Managing Director)
Disclaimer: I am not a SEBI Registered technical Analyst, so consult your financial advisor, before taking any trade. This technical post is only for learning purposes.