Market Outlook for June 3: Key Developments to Watch Ahead of the Opening Bell

Nifty 50 Rebounds, But Sustainability of Recovery Remains in Question

The Nifty 50 bounced back with gains of 0.4 percent after four consecutive sessions of weakness, but experts have raised doubts over the sustainability of this recovery. Despite the decline in India VIX, bearish signals from technical indicators have sparked concerns.

According to market observers, the 23,200 level, which was Tuesday's low, is expected to act as immediate support for the index. A breach below this level may intensify selling pressure and drag the index towards the 23,100–23,000 zone. However, in the event of follow-up buying interest, the 23,700–23,800 zone could act as the immediate hurdle, followed by 24,000 as a key resistance level.

Key Levels for Nifty 50 and Bank Nifty

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The Nifty 50 recovered more than 250 points from its day's low and formed a long bullish candle on the daily charts. However, the index remained below all key moving averages, with short- and medium-term moving averages trending downward. The RSI rebounded from the 40 level to 42.95 but remained below the signal line. The MACD sustained below the reference line, with the red bars in the histogram expanding further.

Nifty Bank Recoups Losses, But Recovery Lacks Strong Confirmation

The Nifty Bank also recouped losses to close with moderate gains and formed a green candle on the daily timeframe. However, other technical indicators continued to signal caution. The banking index remained below all its key moving averages, with short- and medium-term moving averages trending downward. The index reclaimed the 50 percent Fibonacci retracement level of the April rally but needs to sustain above it to strengthen the recovery.

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Options Data Suggests Key Levels for Nifty and Bank Nifty

• Nifty Call Options: The 24,000 strike holds the maximum Call open interest (56.53 lakh contracts), which can act as a key resistance level for the Nifty in the short term.
• Nifty Put Options: The maximum Put open interest was seen at the 23,300 strike (50.11 lakh contracts), which can act as a key support level for the Nifty in the short term.
• Bank Nifty Call Options: The 54,000 strike holds the maximum Call open interest (11.14 lakh contracts), which can act as a key resistance level for the Bank Nifty in the short term.
• Bank Nifty Put Options: The maximum Put open interest was seen at the 54,000 strike (11.75 lakh contracts), which can act as a key level for the Bank Nifty in the short term.

Funds Flow and Put-Call Ratio

The Nifty Put-Call ratio (PCR) rose to 1.03 on June 2, from 0.69 compared to the previous session. This indicates that traders are selling more Put options than Call options, which generally indicates a firming up of bullish sentiment in the market.

India VIX Falls, But Sustaining Below 15 Level Necessary

India VIX, which measures expected market volatility, fell sharply by 7.18 percent to 15.35 after a two-day upward trend and slipped below all key moving averages, indicating support for bulls. However, sustaining below the 15 level is necessary for bulls to regain comfort and confidence in the market.

F&O Data

• Long Build-up: A long build-up was seen in 75 stocks.
• Long Unwinding: 23 stocks saw a decline in open interest (OI) along with a fall in price, indicating long unwinding.
• Short Build-up: 41 stocks saw an increase in OI along with a fall in price, indicating a build-up of short positions.
• Short-Covering: 77 stocks saw short-covering, meaning a decrease in OI, along with a price increase.
• Stocks Under F&O Ban: Amber Enterprises India and Kaynes Technology India were retained in the F&O ban list, while no stocks were added or removed.