After The Bell: Benchmark loses nearly 1% in steep fall; what should investors do on Friday?

Market Outlook

Bears took control of D-Street on Thursday pushing the S&P BSE Sensex below 53,000. The Nifty50 also closed below 15,800 levels largely weighed down by muted global markets.

Asian markets tumbled on concerns about China’s recovery and tighter regulation on technology companies, according to a Reuters report.

Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 485 points to 52,568 while the Nifty50 fell 151 points to 15,727.

“Pessimistic global cues dented the morale of Dalal Street with selling pressure seen across the sectors amid high volatility. Global markets were deep in the red, shadowing a weakness in the Asian markets following the widening Chinese tech crackdown and concerns over the country’s economic recovery,” Vinod Nair, Head of Research at Geojit Financial Services said.

“As we kick start Q1FY22 results season, initial releases of IT sector and a good number of lucrative IPOs will be in focus for the coming weeks,” he added.

Sectorally, buying was seen in utilities, power, and infra stocks while profit-taking was seen in metals, banks, public sector, and finance stocks.

The S&P BSE Midcap index fell 0.3 percent while the S&P BSE Small-cap index was down 0.09 percent.

The Nifty50 hit the lower end of the range on the day of the weekly expiry. Earlier the index was trading in a range of 15,500-15,900 and now the range has narrowed down to 15,700-15,900 indicating that there is a higher probability of a breakout from hereon, suggest experts.

“In this consolidation process the Nifty index has formed an ascending triangular pattern which generally breaks on the upside, hence the risk-to-reward ratio is good for the long positions from hereon,” Jay Thakkar – VP and Head of Equity Research at Marwadi Shares and Finance Ltd said.

“If the Index fails to reverse from current levels and break below 15650 levels then it should be considered as a breakdown from the ending diagonal pattern,” he said.

Thakkar added that if the Nifty index breaks 15650 then one can initiate “doubling” as well i.e. sell the longs and short sell as well because below 15650 it may slide till 15400 levels.

Here’s what experts suggest investors should do on July 8:

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

The Nifty50 index formed a Bearish candle and closed the day with losses of around 150 points. The index has got stuck in a wider range of 15450 to 15915 levels from the last 27 trading sessions and a decisive directional move is missing with the absence of follow up activities.

Now, the index has to cross and hold above 15750 zones to witness an up move towards 15850 and 15915 levels while on the downside support exists at 15600 and 15500 levels.

Expert: Jay Thakkar – VP and Head of Equity Research at Marwadi Shares and Finance Ltd.

The Banknifty had provided a breakout above 35650 levels which was quite positive however it has failed to sustain above those levels on the day of the expiry which is negative.

The index has support at 35000-35200 levels and till those levels are held the bulls need not worry and if it breaks the same then it will slide till 34500-34000 levels.

The momentum indicators on the Banknifty is well in the favor of the bulls whereas Nifty’s momentum is in sell mode favouring the bears, so mixed cues from the momentum of Nifty and Banknifty.

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

In the second half of the day, the Nifty/ Sensex broke the important support level of 15780/52750 and post the breakdown, selling pressure intensified, which is broadly negative for key benchmark indices.

Technically, on intraday charts, the index has formed a lower top formation which indicates further weakness from the current level.

For the next few trading sessions, 15780 on the Nifty50, and 52750 on the S&P BSE Sensex could act as important resistance levels for the traders and below the same, correction wave could continue up to 15635-15600/52200-52000 levels.

On the other hand, the immediate hurdle would be 15780/ 52750, and trading above the same we can expect a continuation of uptrend up to 15830-15860/ 53000-53150 levels.

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

The Nifty faced resistance near the daily upper Bollinger Band as well as near the key barrier of 15900. The selling pressure intensified as the day progressed resulting in a sustained decline.

The sideways action over the last several sessions has developed as an ascending triangle pattern & the index moved down today to complete the pattern on the downside.

The selling pressure was absorbed near the lower end of the pattern as well as near the 78.6% retracement of the recent rise.

Hereon the index is expected to take a leap towards 15900 once again with the potential to achieve a decisive break out on the upside. On the other hand, a breach of the swing low of 15635 will negate this pattern formation.

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