Indian Stock Market Faces Turbulence
The Indian stock market experienced significant turmoil during the first week of October, driven by intense selling activity influenced by unfavorable global market trends. The benchmark indices, Sensex and Nifty 50, witnessed a dramatic decline of approximately 4.5% each, marking their most challenging week in two years.
On the last trading day of the week, the Sensex fell sharply by 808.65 points, or 0.98%, concluding at 81,688.45. Similarly, the Nifty 50 dropped 235.50 points, or 0.93%, to finish at 25,014.60, showcasing a worrying trend for investors.
The Bank Nifty index was not spared either, plunging 383.15 points, or 0.74%, to settle at 51,462.05, indicating a bearish candlestick pattern on the charts.
Technical Analysis Insight
According to market analyst Rahul Ghose, the Bank Nifty has found temporary support at its 20 EMA (Exponential Moving Average) around the 51,300 levels. There is potential for a short-term bounce from this point, bolstered by momentum indicators residing in the oversold region. However, this rebound might be brief.
Market Outlook
Looking at the weekly charts, the Bank Nifty index has closed significantly below the upper Keltner channel, suggesting further downside risk in the week to come. Put writing activity has intensified at the 51,500 level and above, reflecting a continuation of bearish sentiment in the index.
Options Strategy Recommendations
With a negative sentiment dominating, Ghose has proposed a low-risk options strategy for the Bank Nifty. The goal is to realize profits if the Bank Nifty declines below the 51,200 mark by the end of the weekly expiry on October 16.
This strategy offers a maximum risk of just ₹1,000, making it attractive for cautious traders.
Trade Setup for Bank Nifty
Here’s a concise overview of the trading strategy suggested by Rahul Ghose:
| Action | Strike Price | Current Market Price (CMP) |
|---|---|---|
| Buy | 51500 PE (16th Oct expiry) | ₹465 |
| Buy | 51100 PE (16th Oct expiry) | ₹329 |
| Sell | 51200 PE (16th Oct expiry) | ₹360 |
Trade Parameters
The total capital required to initiate this trade is around ₹43,000, and traders can enter if the Bank Nifty is trading between 51,500 and 52,000. The anticipated maximum loss is limited to ₹1,000, while the target profit is set at 2% to 3% of the capital, contingent on individual risk tolerance and market conditions.
Risk Management
This trading approach features a capped risk of ₹1,000 per set, ensuring a disciplined risk management strategy.
Disclaimer: The insights and recommendations provided in this article reflect the perspectives of individual analysts and do not represent the views of any affiliated entities. Investors should seek the counsel of certified financial experts prior to making investment decisions.
