Further pullback rally more likely

Mumbai: On Wednesday, the benchmark indices witnessed a sharp selloff as NSE Nifty ended 454 points lower, while BSE Sensex was down by 1,614 points. Among sectors, all the major sectoral indices were traded in the red. Bank Nifty and financial indices corrected sharply, both the indices shed over four percent.

Technically, after a gap-down open, the market witnessed intraday recovery, but due to consistent selling pressure at higher levels, it again corrected sharply. A reversal formation on daily charts and bearish texture on intraday charts indicating weak sentiment is likely to continue in the near future.

“We are of the view that, the current market texture is weak and oversold. Hence, we could see pullback rally if the Sensex succeeds to trade above 20 day SMA. For traders now, the 71,850 or 20 day SMA (Simple Moving Average) would be the key level to watch out. Below the same, the weak sentiment is likely to continue,” says Shrikant Chouhan, head (equity research), Kotak Securities.

Below which, the index could slip till 71,200-71,000 range. On the other side, above 20-day SMA or 71,850 points, the market could bounce back till 72,000-72,100 range.

Prashanth Tapse, senior V-P (research), Mehta Equities, says: “Hawkish comments by the US Fed triggered a spike in yields on the US 10-year bonds and the US dollar index, which spooked European and Asian markets, including India. India’s stock market valuations are also expensively valued compared to other global stock indices and investors would wait for more positive cues now to extend their equity exposure.”

There are challenges in the near term such as persisting conflict in the middle-east and worries over delay in US Fed rate cut, which could dampen investors’ sentiment going ahead.