Nifty formed a bearish candle on the daily chart as the closing was lower than opening level.
After opening lower at 14811, Nifty traded in a range of 14813/14670 with a negative bias. Nifty ended the day at 14690, down 154 points or 1.04 percent.
Nifty, after a two day rally, found itself in a bear trap and remained under selling pressure throughout the last session of the financial year 2020-21, as weak global cues weighed on the sentiment.
Markets opened weak as Joe Biden shall unveil his infrastructure package today with an increase in corporate taxes. HDFC twins and profit booking in IT stocks led the decline today even as cement and real estate stocks saw keen investor interest. In the broader market, PSU Banks and select pharma names were seen buzzing around.
Weak cues from across the globe forced the domestic market to shed yesterday’s optimism. US markets had a weak close after the US bond yield reached near its 14 month high level while European and Asian markets followed the trend. Private banks were the sectorial laggards due to selling seen in heavy weights. However, mid cap and small cap stocks remained in positive territory today.
Despite a truncated week, Forex market has been very volatile. Spot breached 73 on the back of uptrend in dollar. The market focus is on Biden's additional stimulus announcement and an additional spending boost will further support the dollar rally. But the best thing to do for now is to follow the trend and let the market tell you where it's going to end. In USDINR spot we expect the trading range to be 72.50-73.50.
Lack of follow through to the last Tuesday's strong price action is vindicating the fact that market is still in a sideways consolidation zone. In fact, after today's strong correction, close observation of the last nine trading sessions is pointing that the Nifty may be carving out a new consolidation zone inside the band of 14900/14300 level.
Hence in the next trading session, if the Nifty trades below 14670, it will make an attempt to bridge the bullish gap, present in the 14617/14572 zone, registered on 30th March 2021. Usually such gaps act as support points on the downside and hence some buying should be expected if the index approaches the said gap zone.
If the index closes below 14570, it can induce more weakness eventually dragging the index down to 14300 level, which, as of now, looks like the lower end of the consolidation zone.
Upside strength shall be expected only if the index closes above 14900 with initial targets of 15100 level.
Considering strong moves in the last two trading sessions in both directions, traders should sit on the fence without taking any directional bets.
Among sectors, IT, bank, energy and infra sectors fell 0.4-1.7 percent, while PSU Bank index added over a percent. Midcap and Smallcap indices ended in the green.