After The Bell: Nifty below 14,500, what should investors do on Wednesday?

Market Outlook

The Indian market closed about 1 percent lower on May 4 following weak global cues, selling by foreign institutional investors (FIIs) and concern over spiralling coronavirus infections. India’s reported case count crossed 20 million on May 4 though there was a marginal drop in daily infections.

The S&P BSE Sensex was down 465 points to 48,253, while the Nifty closed 137 points lower at 14,496.

“Indian benchmark indices fell for the second times in three days on May 4 following concerns over FPI selling in the recent past and further action expected to combat the COVID situation,” Deepak Jasani, Head of Retail Research, HDFC Securities, said.

“Volumes on the NSE were higher than recent averages, suggesting that the buying by domestic institutions was subdued, while retail and HNI started to take profits as is evident from the negative advance-decline ratio,” he said.

Jasani added that the Nifty has come under pressure as India’s official tally of coronavirus infections surged past 20 million, management commentary remained cautious on Q1 performance due to lockdowns and suspension of the IPL. Fear of stricter lockdowns led to caution among traders.

Sectorally, buying was seen in the public sector, oil & gas and utilities, while selling pressure was visible in healthcare, energy, telecom, and consumer durables.

On the broader market front, the S&P BSE midcap index was down 0.5 percent and the S&P BSE smallcap index closed with losses of 0.57 percent, outperforming benchmark indices on a relative basis.

Here is what experts say investors should do on May 5:

Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments

The Nifty didn’t break 14,400 on a closing basis, which means the support still holds. If the index cracks it, it can slide to 14,000-14,100.

On the upside, there is stiff resistance at 14,700. It will have to get past it to enter a bullish phase. It is a tight range and traders need to be cautious.

Vinod Nair, Head of Research, Geojit Financial Services

Indian bourses opened strong but failed to hold onto the gains owing to weak international markets. As technology heavyweights continued to weigh on Wall Street equities, US futures slipped, while European stocks struggled for direction. In India, gains in public sector banks were offset by weakness in pharma and auto stocks.

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas

The Nifty opened on a positive note and attempted to build upon the early gains but couldn’t stretch beyond its key hourly moving averages. After a brief consolidation near these averages, the index nosedived to the hourly lower Bollinger Band.

The Fibonacci retracement shows that the index tested the 61.8 percent retracement of the rise from 14,151 to 15,044 for the second consecutive day. The selling pressure got absorbed near this key Fibonacci level, which is at 14,492.

There is scope for recovery as long as the index holds the swing low of 14,416. On the other hand, if the low of 14,416 breaks, the Nifty can get into a prolonged consolidation phase.

Mohit Nigam, Head, PMS, Hem Securities

Markets erased all the opening gains after a second session selloff led by RIL, HDFC Twins, and largecap ITs. A sharp movement was seen in some PSU stocks with PNB gaining 8.5 percent.

A closing below 14,500 is slightly negative for the market and it can test 14,200 again. Strong positive results on the corporate front are protecting the downside.

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

Technically, the Nifty formed a Bearish candle on the daily time frame and wiped out the recovery of the last session.

Now, the index has to hold above 14,500 to witness an up move towards 14,700 and 14,800, while on the downside, support exists at 14,400 and 14,250 zones.

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