Short-term market texture weak, but oversold

For the traders now, the 70,700 would be the key level to watch out, as long as it’s trading below the same, the weak sentiment is likely to continue. Below which, the market could correct till 70,000-69,750 points. On the flip side above 70,700 level, one minor pullback rally is possible till 70,900-71,000 points, says Shrikant Chouhan, head (equity research), Kotak Securities

Mumbai: The benchmark indices witnessed a sharp selloff as BSE Sensex was down by 1,053 points. Among sectors, except Pharma and Healthcare indices all the major sectoral indices witnessed profit booking at higher levels, but Media index lost the most, shed over 12 per cent.

Technically, after a gap-up opening the Nifty/Sensex breached the important support level of 71,300 and post breakdown selling pressure intensified. From the day highest points, Sensex corrected over 1,800 points. It also formed a long bearish candle which is indicating further weakness from the current levels. We are of the view that, the short-term market texture is weak but oversold.

“For the traders now, the 70,700 would be the key level to watch out, as long as it’s trading below the same, the weak sentiment is likely to continue,” says Shrikant Chouhan, head (equity research), Kotak Securities. Below which, the market could correct till 70,000-69,750 points. On the flip side above 70,700 level, one minor pullback rally is possible till 70,900-71,000 points.

Prashanth Tapse, senior V-P (research), Mehta Equities says: “The recent selloffs in Indian markets have been triggered by heavy offloading by FIIs in the past few sessions and today’s slump could be due to mixed earnings outcome so far and higher valuation worries.”

There are indications that rate cuts in the US may not happen soon because of inflation playing truant there, and hence investors are getting uncomfortable with the current valuations. Although India's growth prospects for the year appear positive, slowdown in China and other developing countries may lead to demand slowdown and push investors to curb their equity exposure going ahead.