Nifty witnessed its second lower circuit in morning trade after the country was put on a virtual lockdown due to COVID 19 and formed a Long Black Day kind of candle on the daily chart.
Nifty opened sharply lower by 800 points to 7945 and gradually extended selling pressure to hit a day's low of 7583.
Market was already coming off from one of its worst weeks where it dropped 13 percent. Even SEBI's measures to curb volatility and short selling failed to offer any respite.
The fear among investors only seem to be growing, as today's fall, was steeper than that observed by global peers, who are, as per reports, dealing with a much more severe case of the pandemic.
At the current juncture, the market is in strong bear grip and is not respecting any support level. Expect the correction to continue in the near term. As of now, there is no sign of reversal and thus traders should refrain bottom fishing in this market.
As all critical supports have breached now, Nifty may initially be heading towards 7341 level. This is 50 percent retracement level of the entire rally from the year 2008 lows of 2252 to 12430 level.
Instead of a repo rate cut, RBI is taking these unconventional measures or alternative mechanism to infuse liquidity in the system to support the economy in the effect of coronavirus spread. A rate cut of at least 50bps still remains on cards, which can take place during the RBI policy on April 3.
We believe that 'black swan' events like the worldwide outbreak of Covid 19 call for unconventional solutions such as cash infusion in the economy commonly referred to as helicopter money. While the modalities of the cash infusion has to be well thought out, it can pull up private consumption and can give relief to micro and small enterprises in the short run.
As of now, there is no sign of reversal and thus Traders should refrain bottom fishing in this market.
- Someshwar, Technical analyst, Equidius Research