After The Bell: Market tests support levels; what should investors do on Wednesday?

Market Outlook

Indian market closed in the red for the third consecutive day in a row on January 25 pushing benchmark indices towards crucial support levels. The S&P BSE Sensex plunged by more than 500 points while the Nifty50 was down by over 100 points.

Let’s look at the final tally on D-Street – the S&P BSE Sensex plunged 530 points to 48,347 while the Nifty50 closed 133 points lower at 14238.

Sectorally, selling pressure was visible in energy, oil & gas, power, public sector, and IT indices. The mid & smallcaps were down by more than 1% percent each.

Muted global cues as well as the standoff between India and China dampened sentiment. The Sensex has fallen by about 1800 points from the highs of 50,184.

“Indian markets witnessed a highly volatile trade and closed in the red due to weak global market and reports of Indo-China border tension. The downside was equally contributed by all the sectors except pharma which traded in the green,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“Policy decisions of the US Fed meeting which will commence tomorrow will drive the global market in the coming days. We have seen Indian markets being highly volatile these days and this trend is expected to continue this week as we inch closer to the Union Budget,” he said.

The market will remain shut on January 26 on account of the Republic Day holiday.

Here is what experts feel investors should do on January 27. 

Ashis Biswas, Head of Research at CapitalVia Global Research Limited.

The market witnessed yet another day where bears were able to take the charge completely despite the positive opening. The market might continue to witness the correction this week.

14170-14200 will be an important support zone, a decisive break-down below this level could lead to the next support zone of 13970-14000. The momentum indicators like RSI, MACD indicating the corrections might continue.

Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited

The Nifty index opened positive but failed to surpass the immediate hurdle of 14500 zones and drifted towards 14218 levels. It started to form lower top – lower bottom and witnessing profit booking declines from three sessions.

It closed the session near the lowest part of the day by forming a Bearish candle on a daily scale and broken its rising support trend line. The index may continue to remain highly volatile ahead of the Monthly expiry and Union Budget 2021.

Now, till it remains below 14400 zones, weakness could be seen towards 14100 and 14000 levels while on the upside key hurdle exists at 14500 and 14600 levels.

Ajit Mishra, VP – Research, Religare Broking Ltd

It’s a holiday-shortened week and we expect volatility to remain high ahead also due to the scheduled expiry of January month derivatives contracts. Besides, we’re seeing participants speculating on the probable announcements in the Union Budget, which is further adding to the volatility.

Amid all, we reiterate our view that a decisive close below 14,200 in Nifty would derail the present momentum so participants should align their positions accordingly.

Abhishek Chinchalkar, CMT Charterholder at FYERS

Benchmark Indian indices extended their losses for a third consecutive session today. With today’s close, the Nifty 50 index completed a “Three Black Crows” candlestick pattern on the daily time frame. Furthermore, the index closed below the 20-day moving average for the first time in almost three months, while also momentarily broke last week’s low of 14222.

The chart structure of the past three sessions suggests that we could see a short-term pullback towards 14000-13800 if Nifty sustains below 14222 going forward. On the upside, resistance is now placed near 14500.

As long as it is not surpassed, the index will remain vulnerable for a correction. Hence, one needs to play light and avoid building long positions in the index, until it sustains above 14500.

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