Chinese Government crackdown on ed-tech companies weighed on equity markets across the globe for the third day in a row on July 28 pushing the Nifty50 below 15,750 while the S&P BSE Sensex fell by over 100 points.
Indian markets staged a smart recovery from crucial support levels which is a positive sign. However, with the ongoing turmoil in China, US Fed meeting outcome as well as volatility ahead of July F&O expiry, investors back home lost more than Rs 1 lakh crore in terms of market capitalisation in just 3 sessions.
The average market capitalisation of the BSE-listed companies fell from 235.11 lakh crore as 23 July 23 to Rs 233.85 lakh crore as on July 28.
Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 135 points to 52,443 while the Nifty50 closed with losses of 37 points at 15,709.
“Indian markets closed negative on Wednesday tracking weak global markets amid growing fears about a Chinese government crackdown on tech and education sectors. Investors’ sentiment got hurt after IMF slashed India’s FY22 economic growth forecast to 9.5% from 12.5% projected in April due to the severe second COVID-19 wave which will delay the economic recovery,” Arijit Malakar, Head of Research (Retail) Ashika Stock Broking said.
“Weak global cues also weigh on markets as investors await the outcome of a Federal Reserve policy meeting which will come at night today. Further, investors are squaring their position ahead of the July F&O expiry which is due tomorrow,” he added.
Sectorally, buying was seen in telecom, metals, basic material, as well as capital goods while selling pressure was visible in auto, banks, utilities & realty.
The Bank Nifty managed to hold 34000-33900 support range on the lower side whereas it has strong resistance in the range of 34700-34800 on the upside. The index closed 0.7 percent lower at 34,532.
The S&P BSE Midcap index closed flat while the S&P BSE Smallcap index was down 0.45 percent, underperforming the benchmark indices.
Ahead of the July F&O expiry, Nifty50 bounced back from crucial support placed at 15500-15500 levels to close above 15,700 levels on a closing basis which is positive for the bulls.
Experts feel that a break above 15900 on the higher side could help bulls to take control while a break below 15450 could lead to more selling pressure.
“The Index continues to trade within this broader range of 15450/15500 on the lower side to 15900/15950 on the higher side so it’s a 400-500 points range and whichever side we see a breakout from it will lead to a further trend,” Jay Thakkar – VP and Head of Equity Research at Marwadi Shares and Finance Ltd, said.
“The PCR on the Nifty and Banknifty is quite oversold which indicates that from the expiry point of view Nifty will not close below 15500 levels wherein there is highest OI on the put side whereas it has highest OI at 15800 levels and that needs to be taken off in order to gain further strength,” he said.
Thakkar further added that the options data clearly indicates that call writers have an upper hand in July series Expiry, and the broader range for the July expiry is 15500-15800 levels and within that, it has a narrow range of 15600-15800 levels.
Till 15500 levels are not broken on a closing basis the strategy for the July expiry should be to buy on dips and sell on rise, recommends Thakkar.
Here’s what experts suggest investors should do on July 29:
Expert: Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services
The Nifty50 index formed a Bearish candle on the Daily scale with a long lower shadow indicating declines were quickly bought. It has been forming lower highs from the last three sessions but now holding above its 50 DMA.
Now, the index has to hold above 15700 zones to witness an up move towards 15800 and 15850 levels while on the downside support exists at 15600 and 15500 levels.
Vinod Nair, Head of Research at Geojit Financial Services.
Jitters over Chinese clampdown and wariness over ongoing Fed meeting outcome, continue to disturb the domestic market. However, as the global markets gained ground after the recent sell-off, losses were trimmed by the end of the day.
Due to a weak start to the sector earnings, pharma stocks continued to trade in bear’s grip while banking, auto and realty stocks were feeble too.
Globally, the Fed’s comment on economic recovery, inflation, and monetary policy may provide hints about tapering, which will determine the mood of the market in the near future.
Sumeet Bagadia, Executive Director at Choice Broking
On the technical front, the index has been trading in higher high and lower low formation and tested the support from lower formation, suggesting a bounce back in the upcoming session.
On the Four-hourly Chart, the Index has formed a Bullish Marabozu Candle, which points out strength for the next day.
Hourly momentum indicator RSI has also bounced from the oversold zone, which points to upside movement for the next trading day. At present, the nifty has support at the 15500 levels while resistance comes at 15850 levels.
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas
The Nifty witnessed sharp swings in both directions on July 28. On the way down, the index breached certain key short term parameters on an intraday basis however held on to them on a closing basis.
The index dipped below the 40-Days EMA & the daily lower Bollinger Band as well as below the swing low of 15578 however found support near the lower end of the sideways channel drawn from the June low of 15450.
Thereon the index recovered sharply & closed above these key short-term parameters. As a result, on the daily chart, the Nifty has formed a Hammer, which is a bullish candlestick pattern.
The overall structure shows that the Nifty tested lower end of the consolidation & is recovering from there & is set to head towards the upper end, which is near 15,900-16,000.
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