Sensex in double top formation

Nervousness continued to grip the markets as the US Fed indicating two more rate hikes this year raised concerns over the slackening global economic growth. In addition, mounting fears over China’s growth prospects and falling crude oil demand are the negative catalysts prompting investors to go risk-off in equities.

Sharp selling in metals, oil & gas and power stocks dragged 30-share Index BSE Sensex below the 63,000-mark after having hit a fresh high during the week. “Technically, on intraday and daily charts, Sensex has formed a Double Top formation and also formed a bearish candle on weekly charts which is broadly negative,” says Amol Athawale, Technical Analyst (DVP), Kotak Securities.

For Bank Nifty traders, a 50-day SMA or 43,500pts would act as a key support level, above which a quick pullback rally till 20-day SMA or 44,000-44,300 is possible. On the other side, below 50-day SMA or 43,500, it could slip till 43,300-43,000 level. Vinod Nair, head (Research) at Geojit Financial Services says: “Global central banks are currently focused on addressing inflation and have reiterated their commitment to reaching their target levels, as evidenced by the hawkish commentary from Powell and the unexpected rate hike by the Bank of England.”

The downward revision of earnings guidance by a major US tech company, Accenture has raised concerns about potential earnings downgrades in the Indian IT sector, resulting in pressure on IT stocks. However, the domestic market is not expected to experience a significant correction due to favourable domestic economic indicators and correction in international commodities prices to sustain earnings growth on a quarter-on-quarter basis.