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Volatility could raise its ugly head at any time

·1-min read

The first thing that comes to mind when we think about Monday’s trading session is the ‘comeback.’ As Nifty recovered 200 points from the day’s low; it also closed above the 15,800 mark for the first time in history. 

The day began on a dramatic note after weighing down by a sharp fall in Adani Group companies, which was soon spread across the board and within no time, Nifty went onto touch a low of 15,606.50 levels. However, market participants grabbed this opportunity with both hands and staged a smart recovery. Further, the clarification from the company comforted the market and Nifty ended the day near the day’s high.

The price action of the day has formed a small-bodied bullish candle with a long lower shadow, indicating that dips are being bought. The candle formation on the daily chart resembles a hanging man and most importantly, the index has witnessed two back-to-back formations of reversal type candles. This definitely raises some concerns for the bulls but as long as Nifty does not close below the prior day low, we believe that all is well for the bulls.   

On the downside, the level of 15,550 would continue to act as strong support whereas, on the upside, the level of 15,835 is likely to act as immediate resistance. Traders and investors should keep a close eye on India VIX. We expect the volatility to rise in the near term. The volatility has consistently been declining; hitting the lowest levels since February 2020. However, on Monday, it added nearly 4 per cent. And this rise has been witnessed after a prolonged period of low volatility as the latter is often followed by a highly volatile period.

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