Nifty extends correction; sellers dominate below 20-DEMA despite oversold derivatives setup

Derivatives Analysis Report - Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities

Nifty remained under pressure and closed at 23,378.70, down 169.05 points (-0.72%), as sustained selling near the falling 20-DEMA (23,766) continued to weigh on sentiment. The index slipped towards the crucial 23,350-23,300 support zone, indicating that sellers remain in control of the short-term trend. The inability to sustain above the 20-DEMA despite multiple recovery attempts reflects persistent supply at higher levels and a cautious undertone in the market.

Momentum indicators continue to weaken, with the daily RSI slipping to 40.27, remaining below its signal line near 45.75, which suggests fading buying strength. However, with the lower timeframe RSI approaching oversold territory and the index trading near an important support cluster, a short-covering bounce or temporary profit booking by bears cannot be ruled out. India VIX rose 1.87% to 16.49, indicating a modest increase in hedging activity, though volatility still remains far from panic levels.

From a derivatives perspective, the setup remains cautious. The PCR stands at 0.49, highlighting an oversold derivatives structure and heavy call-dominated positioning. Significant call open interest is concentrated in the 23,500-23,600 strike zone, creating a strong resistance band, while Put writers continue to defend the 23,000-23,200 region, establishing an important support base. The Max Pain level is placed near 23,500.

Technically, 23,500-23,600 remains the immediate resistance zone, followed by the key hurdle near 23,750-23,800 (20-DEMA). On the downside, 23,300-23,250 remains a critical support area, below which the index could drift towards 23,116. While the derivatives setup appears stretched on the downside, the broader sentiment remains cautious, and only a decisive move beyond the current range is likely to determine the next meaningful trend for the index.

Source : Equity Bulls

Keywords

DerivativesAnalysisReport Nifty SAMCOSecurities