Indian equities sold off during the second half of the trading session as US President Donald Trump’s decision to increase tariffs on India to 50%. This, coupled with the Nifty breaking key technical levels on the weekly options expiry session, added to the pressure.
However, the recovery began during the last hour of trade due to the following triggers.
Firstly, the Put-Call Ratio on the Nifty had declined to levels sub-0.7. These are generally levels from where the index stages a bounce. Relative Strength Index on the Nifty, at one point stood at levels close to 35. An RSI reading below 30 means that the index or stock is “oversold.”Secondly, reports began to emerge that US President Donald Trump and Russian President Vladimir Putin are set to meet soon, a development that was confirmed later by the Kremlin. This gave rise to hopes that the Russia-Ukraine war, which has become a thorn for the US to impose tariffs on India, could soon reach a conclusion.
Third, the market also took heart from developments that Russian President Vladimir Putin is set to visit India later this year, but the timeline of this remains unclear.
A combination of all of these factors led to a sharp short-covering move on the upside for the Nifty, with heavyweights like HDFC Bank and Reliance Industries ending sharply off the lows of the day, thereby contributing to the recovery.
“During the session, the Nifty broke below the swing low supports of 24,473 and 24,462 but managed to close decisively above these levels. Although the index has not yet surpassed the 5-day DEMA resistance 24650, the sharp recovery from the lows has given bulls some hope for a meaningful pullback. Stiff resistance is expected around 24,870, where both the 20 and 50-day DEMAs coincide. On the downside, today’s low of 24,344 will serve as the new support level,” Nandish Shah of HDFC Securities said.
(F&O Inputs by Nigel D’souza.)
