Synopsis
Having fallen 10% from the lifetime highs recorded in mid-October, technical analysts see the benchmark indices sinking further, with the Nifty likely to slide to its 200-day moving average level – a technical indicator which is read as a long-term trend indicator as it represents the average price over the last 200 days, that roughly equals the number of trading days in a year. The Nifty is currently 2.5% above its 200-DMA.
Mumbai: Indian equities, which have more than doubled from its pandemic lows in a record-breaking run over the past 21 months, may no longer be a ‘buy on dip’ market at the moment, said analysts. The consistent selling by overseas investors amid rich valuations, reversal in easy liquidity policies of global central banks and the growing threat of the Omicron variant have turned India into a ‘sell on rise’ market for traders for now.
Having fallen 10% from the lifetime highs recorded in mid-October, technical analysts see the benchmark indices sinking further, with the Nifty likely to slide to its 200-day moving average level – a technical indicator which is read as a long-term trend indicator as it represents the average price over the last 200 days, that roughly equals the number of trading days in a year. The Nifty is currently 2.5% above its 200-DMA.
“Based on the current price action, there is a likelihood of the Nifty heading to its 200-DMA placed at 16,200. 16,850 has now become a strong resistance,” said Sriram Velayudhan, VP, alternative research at IIFL.
The Nifty ended down 371 points, or 2.2%, at 16,614.20 on Monday and the Sensex fell 1,189.73 points, or 2.1%, to 55,822.01.
“… the current chart structure seems to be sell on rise,” said Rohit Singre, senior technical analyst at LKP Securities.
The Nifty has come off nearly 2,000 points, or 10.7%, from its all-time high of 18,604.45 and the Sensex has come off over 6,400 points, or 10.3%, from its all-time high of 62,245.43. Both peaks were hit on October 19.
“Overall market breadth remains negative and would require strong positive triggers for changing the current negative trend,” Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services. “Selling pressure is intact at the higher levels and any recovery or bounce is being used by traders to go short on the market.”
In the past few weeks, the Nifty swung between 16,800 and 17,600 levels as traders covered their bearish bets at lower levels, triggering a bounce-back. On Monday, the critical support of 16,800 was broken, opening up the likelihood of further declines in the index.
“One can add shorts on bounce-backs if the data remains negative,” said Siddarth Bhamre, director, alternative investments and research, InCred Equities. “There are no meaningful supports before 15,600 which is a strong support. It doesn’t mean the market will go there definitely.”
