The Indian markets turned negative for 2022, as the benchmark indices – Sensex and Nifty50 – each fell around 2 per cent on Friday. The BSE-listed companies eroded market cap of nearly Rs 4 lakh crore on Friday. While Nifty Bank & Midcap each slipped over 2 per cent in a broad-based decline.
The correction in the market is likely to continue analysts observe as the Nifty on Friday breached an important support level of 17400 and it’s below the 20-day moving average (DMA) and the 40-DEMA of 17692 and 17458 respectively. The momentum indicator is bearish on the daily chart.
Besides, weakness in the currency market seems to have weighed on equities, as Sensex and Nifty are down more than 4 per cent from recent highs and Nifty Bank is down 6 per cent from a record high hit last week.
According to Apurva Sheth, Head of Market Perspectives, Samco Securities, “A negative divergence that could cause a slowdown in rising momentum was noted last week. Since the recent highs, there has been a considerable drop, and it appears that bears could drag the index even further.”
“Immediate support is placed around 17,200 and 17,000 levels. If the index breaks this level, then we could see it drag lower to 16,600. On the upside 17,500 could act as a resistance” Sheth said.
Technically speaking, the last session of correction has dampened the overall sentiments as the significant support of the unfilled gap got breached decisively, implying strong momentum in the sell-off, a domestic brokerage firm Angle One said in its report.
“As we have witnessed a decisive breach below the major support zone in Nifty, one should not rule out the possibility of it testing the immediate swing low of 17150 odd zone, while the sacrosanct support lies at the psychological mark of 17000. On the flip side, a series of resistances could be seen starting from 17500 to 17800 in the comparable period,” the brokerage added.
Considering the recent price action, traders are advised not to carry aggressive overnight bets for a while and should adapt the strategy to follow one step at a time and respect levels on either side. Angle One said advising the market participants for future trade
“Weak global scenario was one of the major catalysts for the fall in the week; hence, one should stay abreast with global developments and the upcoming key domestic macro data. One can continue to focus on individual stocks as the thematic moves are still playing out well in the market,” it added.