After The Bell: Sensex squanders gains after hitting record high, what should investors do on Wednesday?

Market Outlook

The S&P BSE Sensex hit a new record high of 53,129 but failed to hold on to the momentum and quickly pared gains to close in the red on July 6.

The Sensex fell 18 points to close at 52,861, while the Nifty50 ended 16 points closer at 15,818.

Analysts attribute the selloff to profit-taking at higher levels amid muted global cues along with a rise in crude prices.

“Indian market was led by financial stocks, business updates of major banks and NBFCs for the quarter of June, which showed improvement in business activity, minimising concerns over second wave impact,” Vinod Nair, Head of Research at Geojit Financial Services said.

“But, profit-booking breached the overall market by the end of the day. Globally, oil prices surged after OPEC called off talks to boost production despite rising global demand,” he said.

Sectorally, the buying action was seen in banks, finance, power, and capital good stocks, while profit-taking was seen in auto, IT, energy, and healthcare.

On the broader markets front, the S&P BSE midcap index rose 0.19 percent and the smallcap closed 0.26 percent lower.

India VIX moved up by 1.70 percent from 12.06 to 12.27 levels. Lower volatility indicates a range bound move but at the same time declines could be bought.

On the options front, the maximum Put OI is seen at 15,500 followed by 15,000 strikes, while maximum Call OI is seen at 16,000 followed by 16,500 strikes. Options data suggests an immediate trading range between 15,600 and 16,000.

The index closed above 15,800, which is a positive sign, but for the bulls to regain control, a close above 15,915 is required to take the index towards 16,000, say experts.

Here’s what experts suggest investors should do on July 7:

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

The Nifty formed a bearish Doji candle with a long upper shadow on the daily scale, which indicates that follow-up is missing at higher zones.

The index has to hold above 15,800 to witness an up move towards 15,915 and 16,000, while on the downside, support can be seen at 15,700 and 15,600.

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

The Nifty continued with its recent positive momentum and attempted to stretch higher in the first half of the session on July 06. The index went on to extend beyond the daily upper Bollinger Band to test the swing high of 15,915.

However, the bears put up strong resistance, resulting in a decline towards the end of the session. As a result, the index failed to cross 15,900 on a closing basis yet again.

The daily chart shows that the Nifty can form a triangular pattern in which case it can dip towards 15,700 before heading higher.

The overall outlook continues to be positive with the target placed at 16400 over the next few weeks. On the downside, the swing low of 15,635 will act as crucial support, which will maintain the upward trajectory

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

The index failed to close above 15,900 though it crossed the level but swiftly made a U-turn and slide more than 100 points below the day’s high.

The level of 15,900 is a stiff resistance and until the index closes above it, the markets will remain sideways with a positive bias.

The support is placed at 15,400 and any drop can be utilised to accumulate long positions for higher targets.

Mohit Nigam, Head-PMS, Hem Securities

After hitting record levels, benchmark indices erased all the day’s gains to close on a negative note. Ultratech Cement and Shree Cements were the top gainers, while Tata Motors and Gland Pharma were the top losers in Nifty 50.

Auto, IT, metals, and pharma stocks witnessed selling pressure while buying interest was seen in some financial stocks.

Tata Motors plunged 8 percent due to the semiconductor shortage issue and expectation of a negative EBIT margin by JLR. Immediate resistance levels for Nifty are 15,900, while key support is 15,600.

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