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The market crashed in full force on the first day of the week of June 13, 2022 as benchmark indices collapsed below their crucial levels on general selling pressures. Markets started the week with a sharp dip, continuing the prevailing correction phase. Fear of aggressive rate hikes weighed on sentiment and prompted a gap-down start, but the recovery over the past hour pared some losses. Investors have become concerned that central banks will raise interest rates more aggressively in a bid to fight inflation in the coming months, which in turn will weigh on economic growth and put pressure on margins. The correction in global markets is due to a double whammy of forthcoming interest rate hikes and central bank balance sheet reductions. Consequently, the Nifty index closed at 15774; down 2.6%. At the sector level, all indices ended in losses, with IT, metals and banks being the biggest losers. The broader indices also lost more than 2.5% each. All eyes would be on the CPI data to be released tonight. In addition, Wednesday's Federal Reserve meeting would add further volatility. Nifty has the March 2022 low, i.e. H. around 15,671 levels, almost retested and its collapse would pave the way for another drop towards 15,450 levels. Higher than expected US inflation data fueled the already battered market which was discounting a 50 basis point hike in Fed interest rates. The weakening rupee continued FII selling coupled with expectations of higher domestic CPI reads gripped domestic markets with fear. Markets were also bearish on continued strength in Brent crude prices, with 10-year bond yields rising to 3.20% from recent lows of 2.80%, and the expected CPI numbers. We will continue to trade with high volatility however medium to long term risk takers should start entering the market as this could be in the latter stages of consolidation. The fear and uncertainty was clearly visible in the Indian VIX which is up over 15% at 22.50. If the Nifty breaks below 15600 and closes it will technically be a major downside event for the market. In such a situation, the index would fall to the 15550-15450 level in the short term. It is prudent to reduce a weak long position below the 15600 level. Also, Banknifty could drop to the 32000 level if it finishes below 33500. In the event of a recovery, the 15950-16250 zone would act as a hurdle. We recommend using rebound to create shorts in the index until we see signs of a reversal. Stocks, on the other hand, present opportunities on both sides, so plan accordingly.
Resistance: 15950, 16050, 16150
Support: 15700, 15600, 15500
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