Pullback formation likely to continue

Mumbai: On the last day of week, the benchmark indices witnessed a sharp price correction, the Sensex was down by 1157 points. Among Sectors, almost all the major sectoral indices witnessed profit booking at higher levels but IT index lost the most shed 4.7 per cent.

During the week, market consistently faced selling pressure at higher levels. However, on last Friday after a gap down opening benchmark indices registered a sharp pullback rally. Technically, on weekly charts, the index has formed bearish candle and currently it is trading below short term averages, which is largely negative.

Amol Athawale, VP-Technical Research, Kotak Securities, said: “We are of the view that, the medium -term market texture is still in to the weak side but due to temporary oversold conditions the current pullback formation is likely to continue in the near future.”

For the traders now, 72,600-72,300 would be the key supports zones while 73,500-73,700 could act as crucial resistance areas for the bulls. For Bank Nifty, 47,200 and 47,000 or 50 day SMA (Simple Moving Average) would be the sacrosanct support zone for the positional traders. Above which, it could bounce back up to 48,000-48,200. On the flip side, below 50 day SMA traders may prefer to exit out from the trading long positions.

Prashanth Tapse, Senior VP (Research), Mehta Equities says, “Short covering came into play after a 4-day losing streak as markets bounced back sharply on late buying in frontline banking stocks which helped Sensex close above the crucial 73k mark. In fact, Indian equities outperformed global markets which plunged further due to escalating tensions in West Asia and uptick in dollar against major currencies.”

There is a lot of money waiting on the sidelines to enter the domestic market, as India’s long-term growth story provides an opportunity for investors to deploy funds after a healthy correction.