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Markets experienced healthy short coverage towards the end of the close, which helped key indices reverse a three-day losing streak. With the US FOMC minutes now out of the way, the market is more or less preparing for the likely rate hikes and hence we saw heavy buying on the F&O expiration. While we may see bouts of selling due to other negative factors such as higher inflation, ongoing FII selling and the Russia-Ukraine conflict, recovery rallies will be seen despite volatility. Benchmark indices broke their three-day losing streak and ended higher, with Nifty hovering around 16200. Finally, the Sensex was up 503 points to 54252 and the Nifty was up 144 points to 16170. On the daily charts, Nifty has formed a leggy hammer formation that supports further upside from the current levels. After the sharp sell-off, the market showed signs of exhaustion and could recover in the short to medium term. Technically, the broad market is in oversold territory and fundamentally, valuations are just below the three-year average. A major reason for the current correction is selling by FIIs and a reduction in domestic buying. A drop in FII sales will be a major reason for the rebound. The measures to be implemented by the FED and RBI in June will be an important factor in this. Additionally, we should note that the fiscal measure announced by the Indian government to control inflation is positive for the domestic market. For the trend-following traders, 16150-16050 would act as a key support zone. If the index trades above it could rally as high as 13250-16350. On the other hand, uptrends below 16050 would be vulnerable. Below that, bulls may prefer to exit the long positions and the index may retest the 16000-15800 level.
Resistance: 16200, 16275, 16350
Support: 16150,
16075, 15875
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