Nifty formed a bullish hammer kind of candle on the daily chart and closed with gains of around 165 points.
On an hourly chart, Nifty index has given a breakout of falling channel formation and showed positive crossover in stochastic and RSI, which supports the upward trend.
Sharp recovery was witnessed from a good support zone and the Nifty closed the day at 17562 with gains of one percent. It formed a bullish candle on the daily chart after two successive bearish candles.
Domestic indices staggered during the early trading session however positive trends in the global markets comforted Indian equities to rebound during the second half. Global stocks recovered from the fears sparked by troubles in the Chinese economy, ahead of the FOMC meeting that will start later in the day. All major sectors traded in the green zone while the auto sector remained under pressure due to rising input costs and the semiconductor shortage faced by the global auto industry.
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Global markets recovery some other factors were playing out for today's strong performance by Indian markets. First, there was no FIIs' seeling in yesterday's trading session despite a sharp fall that led to positive sentiment. Second, Nifty Put call ratio dipped to 0.98 level which was an oversold territory and that led to a short-covering rally in our market.
Volatility may continue ahead of the FOMC meeting as there is fear that the US fed may talk about the timeline of tapering which could be as earlier as November. The dollar index and US bond yields are showing some signs of upside momentum ahead of the FOMC meeting and if they continue their upward movement then there could be a risk of FIIs selling in the near term in Indian equity markets as well therefore next few days are going to be critical for global markets.
After two days of sharp correction, Benchmark indices witnessed a sharp pullback rally. Nifty found support at 17326 to reverse the falling trend.
Going forwards, 17600/17660 will act as resistance zone. One can lock long gains around and supports are placed at 17500/17430 zone. Any dip near the level will be a buying opportunity, with immediate stop out below 17500. Overall range is coming in between 17300 and 17800.
Level of 17450/17500 will be an important support zone for the market to stay positive in the short term. If the Nifty holds 17450/17500, it can move to 17850.
Momentum indicators like RSI and MACD suggest that the positive momentum is likely to continue.
Texture of the sharp reversal formation near the 10day SMA suggests further uptrend from the current level.
Short term trend still looks up, uncertain global market conditions could see the Nifty in the 17650/17450 range.
Day Traders, as long as the index stays above 17450, Pullback rally is likely to continue to 17600-17650-17680 level. If the index slips below 17430, the uptrend would be vulnerable.
Except power and auto, all other sectoral indices ended in the green, with realty, IT and metal indices up 2-3 percent. Midcap index rose nearly 1 percent, while smallcap index was up 0.2 percent.