Trade setup for Jan 19: More downside awaits Nifty50? Check out key market cues ahead of Wednesday’s session

Indian equity benchmarks ended a volatile session on Tuesday sharply lower amid across-the-board selling. Weakness in IT, oil & gas and auto stocks put maximum pressure on headline indices.

NSE's India VIX index — which gauges the expectation of volatility — rose 6.1 percent to 17.8 on Tuesday, its biggest jump since January 5.

The Nifty50 has formed a bearish engulfing pattern as well as a bearish harmonic pattern on the daily chart, according to Rupak De, Senior Technical Analyst at LKP Securities.

"Momentum oscillator RSI has entered a bearish crossover. Resistance is visible at 18,350-18,400 on the higher end, and support at 18,000-17,850 on the lower end," he said.

: Key factors likely to impact market this week

Nagaraj Shetti, Technical Research Analyst at HDFC Securities, advises the bulls to be cautious at the highs. Immediate support at the uptrend line connecting rising swing lows has been broken on the downside at 18,250, he said.

"Tuesday's long negative candle reflects sharp profit booking at the highs. Such negative pattern was absent in the last 24-25 sessions, after the bottom formation at 16,410 on December 20, 2021. The important hurdle of the previous swing high of 18,342 (October 27) remains intact," he added.

At 7:54 am on Wednesday, Singapore Exchange (SGX) Nifty futures -- an early indicator of the Nifty index -- were down 17 points or 0.1 percent at 18,121.5, suggesting a muted opening ahead on Dalal Street.

Equities in other Asian markets mostly fell on Wednesday, as rising US Treasury yields continued to fuel a global sell-off. Concerns about an earlier-than-expected tightening of US monetary policy also added to investors' concerns. MSCI's broadest index of Asia Pacific shares outside Japan was down 0.1 percent at the last count.

Japan's Nikkei 225 was down 1.8 percent and China's Shanghai Composite 0.1 percent, though Hong Kong's Hang Seng rose 0.4 percent.

S&P 500 futures in Asia were flat. On Tuesday, the three main Wall Street indices dropped 1.5-2.6 percent.

The Nifty closed below its 20-day exponential moving average due to the last-hour sell-off, following what seemed like a tug of war between the bulls and the bears, said Ruchit Jain, Lead Research at 5paisa.com.

This certainly has applied some brakes to the recent momentum, and some correction within an uptrend cannot be ruled out, he said.

"In case 18,000, where immediate support is placed, does not hold, we could see this correction getting extended towards the 20-day exponential moving average, at 17,800. On the flipside, 18,300-18,350 levels will now be seen as immediate resistance," he added.

HDFC Securities' Shetti fears more weakness is possible in the short term. "Any upside from here could find resistance around 18,225 and that could be a 'sell on rise' opportunity. The next lower level to be watched is 17,800," he said.

Exchange data shows that the maximum call open interest is accumulated at the strike price of 18,300, with 1.5 lakh contracts, followed by 18,400, with 1.3 lakh contracts. On the other hand, the maximum put open interest is placed at 17,500, with more than 86,000 contracts, and the next highest at 18,000, with close to 86,000 contracts.

This suggests a major hurdle at 18,300-18,400, and immediate support at Mount 18,000.

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

TCS, L&T, Grasim, Adani Enterprises, Adani Transmission, Adani Green, Aditya Birla Fashion, Trident, Chambal Fertilisers, Deepak Fertilisers and Polycab were among the 26  stocks in the BSE 500 pack that hit 52-week highs.

Three stocks in the broadest index on the bourse hit 52-week lows: Dilip Buildcon, Spandana Sphoorty and IGL.