Trade setup for Oct 6: More steam left in Nifty50 ahead of RBI policy? Key market cues before Wednesday's session

Indian equity benchmarks extended gains to a second straight day on Tuesday, led by oil & gas, financial and IT shares. The Nifty50 index reclaimed the

17,800 mark, having come within 115 points (0.6 percent) of a record high, registered on September 24. Analysts are awaiting the RBI's policy review and the onset of the earnings season -- both due this week.

The 50-scrip index has formed a bullish candle on the daily scale and higher highs on the shorter timeframe, suggesting that buying interest can continue, according to Chandan Taparia, Vice President-Equity Derivative and Technical, Broking & Distribution, Motilal Oswal Financial Services.

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The index is signalling uptrend continuation on the daily charts, and a promising higher high and higher low series on the intraday charts, according to Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.

For trend-following traders, key support is placed at the 17,750 level. "If the index rises above it, the uptrend texture is likely to continue up to 17,880-17,900 levels. On the flipside, below 17,750, it may trigger quick intraday correction up to 17,710," Chouhan said.

At 8:52 am on Wednesday, Nifty futures trading on Singapore Exchange -- an early indicator of the Nifty50 index in India -- were down 28.5 points or 0.2 percent at 17,790.5, suggesting a muted start ahead on Dalal Street.

Equities in other Asian markets weakened with MSCI's broadest index of Asia Pacific shares outside Japan down 0.6 percent in early deals, despite strong gains on Wall Street overnight. Japan's Nikkei 225 benchmark was down 0.9 percent.

S&P 500 E-Mini futures were down 0.5 percent in early Asian trade, indicating a weak start in the US on Wednesday.

On Tuesday, the three main Wall Street indices jumped around one percent each amid a rebound in tech stocks. Investors awaited jobs data due later this week for more clarity on the US central bank's stance on stimulus and monetary policy going forward.

Independent analyst Manish Shah expects Nifty50 to reach 18,000-18,150 levels in the next couple of days, saying the underlying current remains strong. The bullish sentiment remains intact with support for the index at 17,550-17,500, he said.

Rahul Sharma, Co-Founder of Equity99, expects banking, chemical, paper and logistics shares to be in focus on Wednesday.

Nifty50: Sharma expects the 17,865 level to act as immediate resistance for the index and sees strong resistance at 17,950 levels. Crucial support is placed at 17,700, followed by 17,650, he said.

Bank Nifty: The banking index is expected to face resistance at 37,900, followed by 38,100, and continue to find strong support at 37,500, he said.

Foreign institutional investors (FIIs) pulled out a net Rs 1,915.1 crore from Indian equities on Tuesday. However, domestic institutional investors (DIIs) saved the day, net purchasing shares worth Rs 1,868.2 crore, exchange data showed.

The maximum call open interest is accumulated at the strike price of 18,000 and there is a high degree of open interest at 17,900. On the other hand, among the strike prices carrying high put open interest are 17,700, 17,600 and 17,500, NSE data shows. This suggests immediate resistance at 17,900 for the index, whereas support comes in at 17,700, followed by 17,600.

Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:

Reliance Industries, Indian Oil, ONGC, HPCL Canara Bank, Coal India, Titan, Tata Power, Tata Investment and SBI Life were among the 45 BSE 500 stocks clocking 52-week highs. Brigade, Inox Leisure, PVR, IRCTC, Allcargo, Deepak Nitrite, Aarti, Abbott and HEG were also on the list.

No stock in the broadest index on the bourse hit a 52-week low.

NSE's India VIX index -- which measures the expectation of volatility in the near term --  eased two percent to 16.4 on Tuesday.