Nifty formed an inverted bearish hammer kind of candle on daily chart and negated its higher highs higher lows of the last four sessions.
Global equity markets witnessed steep corrections and Indian markets also followed suit as there was widespread selling, especially in banking, metals, and realty stocks. After a sharp rally in recent sessions, the markets could see some bouts of volatility in the near future. Benchmark Nifty has formed a strong reversal formation which clearly indicates high chances of a further correction from current levels.
Unfortunate event has come at a time when the global markets are already facing headwinds of tapering of quantitative easing (QE) by US fed in the coming months. In India, the run up to UP election could also create some anxious moments for equity investors. Accordingly, we have been advising reducing exposure to high beta and high risk small-cap space in favour of large-cap stocks from IT services, pharma and FMCG sectors.
Following high volatility and weak global sentiments, Domestic market ended in a bear grip with Metal and PSU Banks leading the downward rally. Global markets traded negatively as investors were cautious ahead of multiple central bank policy meetings scheduled this week. However, due to weak US job data and inflation increasing at a slower pace, Fed is not expected to hint on taper plans in the upcoming meeting.
Nifty has confirmed the shooting star as well as formed Bearish Marabozu Candle on four hourly charts, which suggest some profit booking can be seen in the next session.
Moreover, Index faced resistance from 21HMA and gave a closing below it, adding to the weakness.
Correction continued even as Nifty unsuccessfully tried to hold above 17500. Market suggests that 17450/17500 will be an important support zone for the market to stay positive in the short term. If it is unable to sustain the level, Market may slip further to 17250/17300.
Stochastic and MACD indicator is showing weakness, with negative crossover on a daily time frame which indicates southward direction in the upcoming session.
At present, Nifty seems to have resistance at 17778, while immediate support comes at 17254 level, a break can led further downside.
Following high volatility and weak global sentiment, Domestic market ended in a bear grip with metal and PSU nanks leading the downward rally.
Texture of the market is weak and downward momentum could continue in the short run. For the next few trading sessions, 17524 level could be the sacrosanct resistance level for the traders, and trading below the same we can expect further price correction up to 17300/17254 levels, whereas trading above 17524 may trigger a quick pullback rally up to 17625/17675 level. Contra traders can take a long bet near the 17254 support level with a strict 50 points stop loss.
Sector Wise:- Except FMCG, all other sectoral indices ended in the red with metal index down nearly 7 percent. Midcap and smallcap indices fell nearly 2 percent each.