Market Trend Analysis on January 1st, 2021 - Nifty, BankNifty, and VIX Influences

Introduction

On the 1st of January 2021, traders and investors were closely monitoring the market trends in anticipation of substantial policy decisions set to be announced in the Union Budget 2021–22. In this article, we will provide an in-depth analysis of the market conditions for Nifty and BankNifty, along with an assessment of how the VIX impacted the overall market performance.

Market Trends and Analysis

Nifty

The Nifty formed a trendline in a 1-hour time frame, indicating potential volatility if it opens a gap down. In such a scenario, the outer trendline could act as major support, prompting a rebound back into positive territory. Alternatively, if the inner trendline is broken, a strong upside momentum can be expected. For the upside direction, 13750 acts as a major resistance point, while 13450 is likely to support the stock.

BankNifty

BankNifty experienced a breakout from a wedge pattern on a daily time frame but recently retraced a bit. If it breaches the previous day's low, expect a further downside momentum, especially with the Fibonacci retracement at the 0.38 level acting as a key resistance. Until BankNifty remains below 31000, traders should anticipate declining trends. For the downside, 30400 could serve as a strong support point.

Increased Uncertainties and VIX

Due to heightened uncertainties surrounding the Union Budget, traders and investors chose to protect their capital through profit booking, contributing to a sustained bearish trend for Nifty. This trend has been evident over six consecutive trading sessions post-budget announcement. Given the VIX's rising trajectory and its impact on major indices, it is expected that a decrease in the VIX, particularly by closing more than 2.14 points below its intraday high, could provide the necessary support for a bullish rebound.

Conclusion and Recommendations

The market on January 1st, 2021, was driven by investors avoiding significant positions due to the upcoming Union Budget. With Nifty facing resistance at 13750 and support at 13450, and BankNifty retracing slightly with a possible strong support at 30400, traders are advised to enter trades with strict stoploss orders. Additionally, any significant changes in the VIX could significantly impact the market, so investors are reminded to keep a close eye on volatility indices for real-time updates.