After the Bell: Sensex below 50,000, here’s what investors should do on Tuesday

Market Outlook

Indian market closed in the red for the fifth consecutive day in a row on February 22 pushing benchmark indices below crucial support levels. The S&P BSE Sensex plunged by more than 1,100 points while the Nifty50 was down by more than 300 points.

Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 1145 points to 49,744 while the Nifty50 fell 306 points to close at 14,675.

Sectorally, the action was seen in the metal index while selling pressure was visible in energy, realty, IT, auto, and capital goods stocks. Rise in COVID cases along with weak global cues were prominent factors pushing the benchmark indices lower, suggest experts.

“Rising economic restrictions from a spike in virus cases and weak global cues hit the domestic market sentiment. The rate of market fall was aggravated by a sharp rise in volatility, being a monthly F&O expiry week,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“FPI inflows which were leading the rally slowed down due to global vulnerabilities from rising bond yield & inflation. However, this is a buy-on-dip market, a short-term correction will trigger new buying, as economic fundamentals have improved, with more focus on industrial & cyclicals,” he said.

Here is what experts are advising investors to do on February 23:

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

Nifty formed a Bearish Belt Hold kind of candle on daily scale as remained in bears grip and continues its formation of lower highs – lower lows of the last four trading sessions.

Now, till it remains below 14800 zones, weakness could continue towards next key support of 14500 and 14400 zones while on the upside hurdles are seen at 15000 and 15150 zones.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities

Today, Nifty/Sensex has broken crucial support of 20 days SMA, which was at 14780/50150, and also the retracement support, which was at 14730/50100 levels.

India’s Volatility index has also jumped to 25.82, which is a 16.04 percent rise in a single day. It is negative for the market as it signals further weakness in the market. The next level to watch out for would be 14500/49340, which is a 50% retracement of the previous up-move started from the lowest levels of 13600/46160.

As the market is approaching the monthly expiry of the current month, the market could bounce back from 14500/49340 levels.

The short-term and medium-term strategy should be to buy on dips. On the higher side, 14900/50400 and 15000/50600 levels would be immediate hurdles.

Our advice is to invest in strong companies between 14650/14550/49400 levels with a medium-term view.

Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas

The Nifty witnessed the continuation of the bearish momentum from the last week. In the last week, it had formed a bearish outside bar & an Engulfing bear candle so today it witnessed follow-through action on the downside.

On the way down, the index had breached the key level of 15000, which resulted in increased selling pressure. Thus the Nifty has broken its 20 DMA today & is approaching the 40 DMEA, which are crucial short-term moving averages.

The overall structure shows further downside potential. The short-term target on the downside continues to be pegged at 14400. On the other hand, any minor degree bounce is likely to face resistance near 14800-14900.

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