Wait for further weakness from current levels

Mumbai: In the past week, the benchmark indices witnessed a sharp correction, with Sensex closing at 59,465 points.

Among sectors, all the major sectoral indices registered profit booking at higher levels, but metal and reality indices lost the most. Metal index drag over 6 per cent while reality also trimmed nearly 6 per cent. During the week, the index has breached 20 day SMA (Simple Moving Average) important support level and post breakdown it intensified the selling pressure. Technically, the index has formed long bearish candle on weekly charts which supports further weakness from the current levels.

“We are of the view that, the short term market structure is weak but oversold. Hence, we could see a quick pullback rally if the index trades above 59,600. Above that, the pullback formation is likely to continue till 60,000-60,300,” says Amol Athawale, Deputy Vice President and Technical Analyst, Kotak Securities. On the flip side, as long as the index is trading below 59,600, the weak sentiment will continue. Below which the index could retest the level of 200 day SMA or 59,300. Further weakness may also continue which could drag the index till 59,000. Short-term traders should remain cautious and be very selective as there is a risk to get trapped at lower levels.

Dr Joseph Thomas, Head of Research, Emkay Wealth Management on the markets, said: “The downslide in the equity market persisted throughout the last week of trading, influenced by internal as well as external developments. The major factor that has been causing a bend in the river is the avalanche of economic data, mostly from the US, that carried hints that the economy might be stronger that one thinks, inviting an inference that there could be further policy tightening in store.” These pressures are not going to go away soon and could dominate discussions and markets for another quarter or so. It looks like the factors responsible for the current weakness still has an upper hand.