Any break from these levels can take the index further down to 14,000 in the short term, say experts
Indian benchmark indices closed at a critical level after a five-day losing streak on Friday last. The last trading week of the current financial year is expected to be super volatile in the wake of a variety of reasons. Though the Nifty and the Sensex gained 1.3 per cent on Friday at 14,744 and 49,858, both ended the week with a loss of 1.9 per cent. Friday’s closing level is important as the market may take a decisive move from here in either direction.
The NSE index broke its range of 14,450 to 15,350 but if this downturn sustains in the week ahead then only markets can go lower. Otherwise, if markets stabilise at the current levels then Nifty can regain its consolidation within the said range.
Nirali Shah, Head of Research, Samco Securities, believes that any decisive break from these levels can take the index further down to 14,000 in the short term.
“Traders should keep appropriate stop-losses while taking positions as markets are currently standing at critical levels”, She added.
Apart from rising yields, Indian indices are facing uncertainties from the second wave of Coronavirus and ascending retail inflation. These concerns have gradually dented the market’s sentiment and added to the pressure. Even though the number of Indians getting vaccinated is increasing, market participants have turned wary of equities. Foreign investors too have become net sellers in the current month on some days. This suggests that bulls are losing their grip and are unable to hold the market.
The weak closing of the benchmark indices on the weekly basis, amid concerns on rising global bond yields and a spike in Covid-19 cases in India. Mid and Small caps saw a bigger cut as Nifty-50 failed to cross the 15,000 mark. Retail investors may be reluctant to build exposure in stocks as the financial year-end approaches. Profit booking was mostly seen in sectors that had gained the most recently.
Amongst sectors, BSE Realty, BSE Capital Goods, and BSE Industrials lost about 6 per cent, 5 per cent, and 4.4 per cent, respectively this week. Fresh restrictions by many states are being taken negatively by investors impacting economy-driven stocks.
Rusmik Oza, Executive VP, Head of Fundamental Research at Kotak Securities said, “Nifty-50 is hovering around the 50-day moving average (DMA), which is placed at 14,748. A decisive break below the 50 DMA could take the Nifty-50 to ~13,500 level in the first phase and any further negatives could open the door to the 200 DMA, which is placed at ~12,500 levels.”
In addition to firming up of Bond yields and a rise in the number of Covid-19 cases in Maharashtra, the markets are expected to remain highly volatile on account of one more important reason. Next week we will see the scheduled derivatives expiry of March month contracts, this too will add significantly to volatility. In absence of any major event, covid-related updates and performance of the global markets will remain in focus.
Shrikant Chouhan, Executive VP, Equity Technical Research, Kotak Securities said, “For Nifty/Sensex, 14,600/49,600 level on upside and 14,450/49,200 on the downside would remain important supports. Keep a buy on dips strategy for the coming week. Nifty has formed a “bullish piercing pattern”, which means it's has absorbed heavy selling pressure and is ready to move higher.”
Markets have been consolidating for the last six weeks and there’s no clarity over the next directional move yet. A decisive move above 14,900 in Nifty might result in a further rebound next week else profit-taking would resume.
Ajit Mishra, VP Research, Religare Broking, said, “On the downside, 14,500 would continue to act as critical support. Meanwhile, participants should focus more on the selection of stocks and risk management”.
In the wake of high volatility expected in the secondary market, retail investors may focus on the primary market next week as some more issues are lined up in the last of the current financial year. The six IPOs from this week witnessed excessive funds being allocated just for their subscription. The overall set-up of the markets is currently portraying caution.
Experts have a piece of advice for the Investors. They said, one should remain invested for the long-term horizon of 5-10 years, while medium-term investors can make aggressive entries in a piecemeal manner once markets start showing signs of stability in the new financial year.