Nifty formed a bullish candle that resembled Inverted Hammer pattern on the daily chart as the closing was higher than the opening level.
An Inverted Hammer is a reversal pattern in which the index closes near its opening levels. It has a long upper shadow, small or no lower shadow and a small body.
Nifty formed an Inverted Hammer or Shooting Star on the daily chart that indicates a pause in bounce back if a follow-up supply happens in the next trading sessions. However, it still requires confirmation.
Nifty started off lower at 15648 and made a successful attempt of recovery to hit the day's high of 15769 in the morning trade. It, however, slipped immediately to hit an intraday low of 15616. In the last hour of the session, it narrowed losses to close 76 points down at 15691.
Nifty opened lower and traded in the red for the most part of the session to close below 15700, continuing the downtrend for the second day. Banking and financials, auto, metals and pharma stocks pulled the index down.
Indian rupee has witnessed a sharp depreciation of more than one percent in today’s trade owing to the strength witnessed in the dollar index and hawkish tone of the US Fed, which has dented the risk-on sentiments in the markets. With a faster than expected rise in inflation and swift recovery in the US economy, the US Fed has projected rate hikes and tapering of its massive bond-buying program sooner than expected, all of which bodes well for further strength in the greenback.
Besides, rise in crude oil towards two-year highs is also weighing on the local unit. In the near term, the path for the domestic currency looks skewed on the downside and we expect it to test level of around 74.90 in coming days.
Bulls appear to have garnered some courage as the Nifty witnessed buying support close to 15600 level, which vindicates the fact that the index is stuck in a trading range of 15600 level to 15900 level. However, intraday attempts to recover, from the sharp gap down opening of 15648 were greeted by selling pressure, which resulted in Inverted Hammer kind of formation with long upper shadow.
Usually, such formations after deep cuts attract follow through buying. If the index sustains above 15616 in the next session, it will attempt to rally towards 15769 and beyond that 15800 can't be ruled out.
Bears will have a fair chance to establish upper hand, if the index closes below 15550 in the next two trading sessions, which can result in bigger damage with an initial target towards 15400.
For the time, Traders to go short below 15600 for a target of 15450 by avoiding long side bets.
Except IT and FMCG, all other indices ended in the red with the metal index falling more than 2 percent. midcap and smallcap indices shed 0.5/1.3 percent.