The Nifty nearing resistance levels of 22,400-22,450 and VIX cooling toward 10 is not a good sign in the near term. Traders are advised to lighten their positions in the short term, analysts said, In an unusual move, volatility gauge India VIX cooled off 19 percent on April 23 to 10.26, extending the early morning fall of 17 percent, after benchmark indices the Sensex and the Nifty opened with a significant gap.
This drop was the sharpest since May 2019, with the volatility index falling to its lowest level in the past nine months.
Experts said that the Nifty nearing resistance levels of 22,400-22,450, and the VIX cooling toward 10 is not a good sign for the near term. Typically, a drop in volatility when markets are at resistance suggests that a correction may follow with an increase in volatility.
The Nifty Option chain shows significant open interest (OI) additions at the 22,400 straddle (both 22,400 CE and PE). The straddle is currently priced at around Rs 205, indicating a range of Rs 22,200 to Rs 22,600 for the April series expiry.
"Currently, there is a higher addition in the Rs 22,400 CE, suggesting some potential cooling off. We advise buying Nifty only above the 22,430 level," said JM Financial.
"India VIX, the domestic gauge for volatility, has swiftly dipped toward the 10 levels, reaching medium-term support levels from where volatility is expected to increase and take a U-turn. We anticipate the India Vix index to rise gradually from current levels as we approach the mid-phase of Union elections, coupled with an increase in global volatility," said Arun Kumar Mantri, Founder of Mantri Finmart.
According to Mantri, "Nifty being near the resistance levels of 22,400-22,450 and the VIX cooling toward 10 is not a good sign for the markets in the near term. Traders are advised to lighten their positions in the short term and use proper hedging for their open positions in the upcoming trading sessions."
At 12.02 pm, the Sensex was at 73,873.22, up 224.60 points, or 0.30 percent, from the previous close. The Nifty was up 72.55 points or 0.32 percent at 22,408.95.
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