Speaking to ET Now, Rahul Sharma from JM Financial Services said markets are bracing for heightened volatility, especially after the Nifty violated the 26,100 support zone — an area that had seen the highest concentration of put writers for the current expiry. He noted that the psychological 26,000 level has now been decisively broken during the session.
“Markets are bracing for a possible round of volatility and we have actually violated the 26,100 support area for the Nifty. This is where we had the maximum put writers present for the current expiry and at the same time, the 26,000 psychological mark has also been broken down in today’s session,” Sharma said.
He added that uncertainty could persist at least until early next week, as markets await developments from the U.S. Supreme Court, expected to be released by Friday night. Domestic markets are likely to react to the outcome on Monday.
“My sense is that at least until the next trading sessions, until Monday basically, the U.S. will be coming out with an update on the Supreme Court’s version, probably tomorrow night, and our markets will react to it on Monday. Until then, volatility should remain,” he said.
From a technical standpoint, Sharma cautioned that the downside could deepen further if the Nifty sustains below 26,000. “Below 26,000, the gates are now open for 25,700 on the downside, which means a potential 300-point slide,” he noted. He also pointed out that Bank Nifty, which had remained relatively resilient so far, has started showing signs of weakness. “Bank Nifty is also turning slightly bearish today. A proper breakdown below 59,500 could mean another 200-point fall,” Sharma said. Highlighting the broader market sentiment, Sharma recalled that optimism had peaked just days ago. “A few days back, we had the highest one-year high put-call ratio for the Nifty, which means optimism was at its peak. This is cyclical in nature,” he explained.
Despite near-term caution, Sharma believes a rebound could emerge once the current event-driven volatility subsides. “Possibly around 25,700, we could see the Nifty bouncing back again and markets improving from there. For the very short term, we are positive on volatility and negative on the Nifty index,” he said.
On the stock-specific front, Sharma recommended a selective long-short strategy in the current environment. He said the realty sector offers buying opportunities amid volatility, with DLF being his preferred pick.
“We like the realty pack to be bought in this volatility. DLF is one of them. We expect DLF to head towards 750–760 in the medium term. From a positional delivery perspective, one can buy DLF with a stop loss at 675,” he advised.
On the bearish side, Sharma flagged GMR Airports as a short-term trading candidate. “The stock has been continuously grinding down over the last few trading sessions. Below 102, we expect it to test 96–97 on the downside,” he said.
Summing up his approach, Sharma stressed balance over aggression in volatile markets. “The best thing to do is a long-short approach in a volatile scenario, where overall indices are expected to swing on either side,” he added.
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