After The Bell: Sensex cracks nearly 2%, what should investors do on Tuesday?

Market Outlook

The S&P BSE Sensex wiped out most of the gains made in the previous trading session to close below 50,000 while the Nifty50 closed below the 50-Days Moving Average (DMA) on April 5 on worries around rising COVID cases and resultant lockdown.

Indian markets saw a knee-jerk reaction on Monday after the Maharashtra government on April 4 announced new restrictions under its ‘Break the Chain’ campaign to curb the spread of novel coronavirus infections.

The announcement came after the state Cabinet’s virtual meeting. Maharashtra yesterday reported more than 57,000 new COVID-19 cases during the previous 24-hour period. On April 5, India reported 1.03 lakh new COVID-19 cases – a new record high.

Let’s look at the final tally on D-Street – the S&P BSE Sensex plunged 870 points to 49,159 while the Nifty50 closed with losses of 229 points at 14,637.

Sectorally, selling pressure was seen in realty, banks, finance, auto, public sector, and consumer discretionary stocks while some buying was seen in IT, metal, and telecom stocks.

“The sharp surge in COVID-19 cases has dented investor sentiment and has increased fear of harsh restrictions which would impact economic activity,” Ajit Mishra, VP – Research, Religare Broking told Moneycontrol.

“Going forward, government actions to curb the surge would be one of the important factors to watch out for. Further, the upcoming RBI monetary policy would be actively tracked by investors. We expect the RBI to maintain its dovish stance and leave key rates to be unchanged,” he said.

Here is what experts suggest investors should do on April 6:

Rohit Singre, Senior Technical Analyst at LKP Securities.

The Nifty closed the day at 14,638 with a loss of over a percent and formed a bearish candle on the daily chart. The overall structure still seems that of consolidation as the index rejected around 14,900 zones for the third time on hourly charts.

We saw profit booking from the same levels, and if the index trades below 14,700 zone then we may see the next move towards its previous swing low of 14,300 zone. If the Nifty50 sustains above 14,700 then some relief rally can be seen.

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

India VIX moved up by 6.163% from 19.98 to 21.21 levels. Spurt in volatility from lower levels is keeping the market volatile with selling pressure at higher zones.

The index negated its higher lows formation of the last four trading sessions and formed a Bearish candle with a long lower shadow indicating overall weakness but some support-based buying seen in sharp declines.

Now, Nifty50 has to cross and hold above 14,700 zones to witness an up move towards 14,850 and 15,000 zones while on the downside, support exists at 14,450 and 14,300 levels.

Ashis Biswas, Head of Technical Research at CapitalVia Global Research

The market failed to show resilience to stay above the 14,800 levels on the Nifty50. While it is subject to further price action evolution, the technical factors are aligned to support a short-term consolidation in the near future.

The market is expected to attempt a breakout above the 14,900 mid of the month. Any corrective wave down should find support around 14,400.

Traders are advised to refrain from building a fresh buying position until the market witnesses a correction to the 14400 level or a breakout above 14900. The volatility is observed to expand in Monday’s trading session indicate profit booking and distribution of stocks at a higher market level.

Abhishek Chinchalkar, CMT Charterholder and Head of Education, FYERS

The index made a smart recovery in the second half of the session and recouped half of its intraday losses, partly underpinned by strength among the IT space, which was the strongest sector today.

Currently, Nifty is stuck in a no trading zone with 14400-14250 acting as a strong floor and 14850-15000 acting as a strong hurdle. Unless the index breaks out of this zone, further range-bound trading looks likely in the short term.

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