Indian equity benchmarks tumbled more than two percent each to four-month closing lows on Monday, tracking a global sell-off amid rising cases of the Omicron variant of COVID-19. All sectoral indices were deep in the red, with the Nifty Bank dropping 3.3 percent to the lowest level in five months.
The Nifty50 has formed a long bear candle on the daily chart with a lower shadow, suggesting sharp downside momentum with a minor recovery, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
“The index has broken below crucial support at 16,700 on the weekly chart. This is a negative sign and one may expect more weakness in the near term,” he said.
Despite the 50-scrip index’s bounceback from the 16,400 mark, the market trend remains bearish, said Manish Hathiramani, Proprietary Index Trader and Technical Analyst at Deen Dayal Investments.
“We could use higher levels to go short for the next target of 16,150-16,200. The upside for the index is currently capped,” he said.
At 7:50 am on Tuesday, Singapore Exchange (SGX) Nifty futures were up 174 points or one percent at 16,832, suggesting a gap-up opening ahead on Dalal Street.
Equities in other Asian markets bounced back on Tuesday as investors assessed the impact of the Omicron variant of COVID-19 on the world economy. MSCI’s broadest index of Asia Pacific shares outside Japan was up half a percent at the last count.
Japan’s Nikkei 225 was up two percent, and China’s Shanghai Composite and Hong Kong’s Hang Seng up half a percent each.
S&P 500 futures were up 0.6 percent in Asia. On Monday, the three main Wall Street indices ended 1.1-1.2 percent lower.
Weekly and monthly charts remain negative and any bounce from the lows could be a ‘sell on rise’ opportunity in the near term, said HDFC Securities’ Shetti. There is the possibility of a pullback rally from the lower levels, which could be a ‘sell on rise’ opportunity. The next downside levels to be watched are around 16,200 (10-month exponential moving average), which could be reached in the next 1-2 weeks,” he said.
Rahul Sharma of Equity99 believes it will be important to see if the bulls take over the bears on Tuesday. He is of the view the Indian market is strong enough and investors should hold on to quality stocks now.
“The market is currently in a highly volatile zone. It has been in a correction mode for the last many sessions, but the recovery at the end of Monday is a good sign. We can see a bounceback on Nifty in the next few sessions followed by a dip,” he said. “The market needs to open and end in the green, else we can see more dips in the coming days… Every correction is in fact a good opportunity to add more quality stocks in your portfolio,” Sharma added.
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