The markets extended decline for the fourth straight session and lost nearly half a percent. Profit booking continued in the market and after the initial uptick, the Nifty oscillated in a narrow range. It finally settled around the day’s low at 19,674.25 levels. The Sensex also slipped 221 points and ended the day at 66,009. Pharma, realty and metals were top losers among the sectoral pack. However, stability on the broader front eased some pressure. PSU Banks however bucked the trend and IndusInd Bank was among the top gainers in an otherwise ranged market. The Nifty PSU Bank Index closed up 3.5%.
Shrikant Chouhan, Head of Research (Retail), Kotak Securities said, “After posting new highs in the previous week, the Nifty 50 Index and Sensex 30 Index declined this week, following the broader trend in global equity markets. Sensex mid-cap and small-cap indices also ended in negative territory this week. Majority of sectoral indices saw correction in the range of 0-3% during this week. BSE Commodities, BSE Healthcare, BSE Metals and BSE Realty ended the week with negative returns of close to 3%. FPIs remained net sellers of Indian equities in this week.”
Ajit Mishra, SVP – Technical Research, Religare Broking said, ““Feeble global cues combined with pressure on select heavyweights are weighing on the sentiment. Going ahead, recovery in the banking and financial majors would be critical for any meaningful rebound else the corrective tone would continue. We feel it is prudent to restrict aggressive positions until the market stabilizes.”
Technical trends
While Indian market valuations have become expensive, other bigger concerns like rising crude oil prices, firm US Dollar index and treasury yields coupled with continuous FII selling have been denting the sentiment. Here is a look at what are the key technical levels to watch out for-
Jatin Gedia– Technical Research Analyst at Sharekhan by BNP Paribas said, “The Nifty is currently trading at a crucial support zone 19720 – 19620 where support parameters in the form of 40 moving average and key Fibonacci retracement level is placed. The speed of the fall has slowed down as the hourly momentum indicator has a positive crossover which indicates that a pullback is likely before the next leg of the fall resumes. The pullback can be till 19850 – 19880 where key hourly moving averages and the gap area formed on September 21 is placed. In terms of levels, 19620 – 19604 is the crucial support zone while 19850 – 19880 shall act as an immediate hurdle zone.”
Rupak De, Senior Technical analyst at LKP Securities added that “Nifty experienced consistent selling pressure throughout the week, resulting in a decline of 2.80% from its all-time high. This recent correction has caused it to dip below the critical 21-day Exponential Moving Average (21EMA). The sentiment appears bearish at this point, with a key support level identified at 19,600. A breach below 19,600 could potentially initiate a more significant market correction. On the upside, 19,800 is expected to serve as a resistance level.”
Amol Athawale,Vice President – Technical Research, Kotak Securities explained that “Technically, on weekly charts, the Nifty has formed a long bearish candle, indicating a weak sentiment in the near future. However, due to temporary oversold conditions, we could expect a one quick pullback rally in the near future. For the short-term traders now, the 50-day SMA (Simple Moving Average) 19600 and 19500 would be the key support zones while 19800 and 19900 could be key resistance areas. For Bank Nifty, the 50 day SMA or 45000 would be the sacrosanct support level. As long as its trading below the same, the weak sentiment is likely to continue. Below which, the index may slip till 44300-44000. On the flip side, a fresh uptrend is possible only after the dismissal of a 50 day SMA or 45000, above which it could move up till 45400-45500.”
Bank Nifty volatile
The Bank Nifty has also witnessed a volatile day of trade. Ultimately the bears managed to keep the index under pressure and it closed on a negative note . Gedia added that “More importantly it has closed below the crucial 20- and 40-day moving averages which is a sign of weakness. The daily momentum indicator has a negative crossover which is a sell signal. Thus, both price and momentum indicator are suggesting a further decline. Considering sharp fall during the week it can provide a pullback and so sell on rise around resistance 44900 – 45000 shall be the preferred trading strategy. On the downside 44500 – 44300 shall be the potential downside from short term perspective.”
Rupak De of LKP Securities pointed out that, “The Bank Nifty index witnessed a significant double top breakdown pattern, which often signals a reversal in trend. This bearish pattern was largely influenced by selling pressure in HDFC Bank. The index breached its 20-day moving average (20DMA) located at 45,000. A break above this level could trigger some short-covering, but the overall sentiment remains bearish. The prevailing sentiment in the Bank Nifty index remains bearish. As a result, it’s advisable to maintain a “sell on rise” approach. The next immediate support is seen in the 44,500-44,400 range.”
Rupee rebounds
The rupee rebounded after three weeks of downfall after India’s bond inclusion in the Global Bond Index. Dilip Parmar, Research Analyst, HDFC Securities believes that “Though the inflows will come next year, the sentimental impact has been seen on the local rupee. The impact of the announcement may not be sustainable amid a rally in the greenback and foreign fund outflows from domestic equities amid a surge in the short-term US bond yields. In the near-term, spot USD-INR is likely to trade in the range of 83.15 to 82.60.”