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Bears continued to push domestic indices lower amid unfavorable global cues, with significant selling in metals and IT stocks. Sentiment was dampened by renewed concerns about the Fed tightening in response to strong US economic data. However, while the easing of COVID restrictions in China benefited the demand outlook, fresh sanctions on Russian oil further increased volatility in global oil markets. Sentiment prevailed throughout the session as investors sold shares of interest rate sensitive stocks such as banks, auto and real estate stocks on the eve of the RBI's credit policy announcement. In the past, we have seen investors become cautious prior to an important event and book some profit to avoid being caught off guard. Markets traded lackluster, losing nearly half a percent, following weak global signals. After the gap-down start at close, the Sensex was down 208 points to 62626 and the Nifty was down 58 points to 18642. Currently, the market is trading near the 10-day SMA (simple moving average), which indicates a strong possibility of a trend reversal in the near future. If the rate hike comes in above street expectations, investors could hit the panic button, which could accelerate selling pressures. The FX market also saw frantic activity as the rupee broke through 82, fueling concern for foreign investors to reduce their positions in local stocks. For traders, 18750 would be the key level to watch as above that we could see a new uptrend rally to 18850-18900. On the downside, a fresh round of selling pressure is only possible after the move away from 18550 and below that the index could slip to 18,500-18450. Markets are digesting recent gains and it may be a few more sessions before the trend resumes. In the meantime, traders should focus on managing their positions and gradually adding quality names across sectors. The fall in Auto and IT majors offers a good opportunity for accumulation, while Pharma shows no signs of a reversal yet. The Bank Nifty Index posted slight gain bookings a day ahead of the key RBI policy event. The index is stuck in a broad range between 42700 and 43400 and a break on either side after the event will see some trend movement. The undertone remains bullish and if holding long positions the 42700 level should act as a strict stop loss. If the index breaks above 43400 it will see a sharp short covering move to the upside towards 44300-44600.
Resistance: 18700, 18800, 18900
Support: 18600, 18500, 18400
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