Equity Markets Near Critical Support Zone, Expect Volatility Ahead: Analyst
Benchmark equity indices logged their worst week in nearly two months, as they declined around 2%.
The equity markets are close to their critical support zone and a further dip in the levels can lead to a major correction, according to an analyst.
The NSE Nifty 50 and Bank Nifty have given a very bad weekly close and they are in a very critical support zone, said Kunal Shah, senior technical and derivative analyst at LKP Securities Ltd. The last hope for Nifty is 21,800. If that breaks, the correction will continue to the 21,200-mark, he said.
In the case of Nifty Bank, the larger part of the correction is over, said Shah. The next immediate support will be 47,050, which is a 100-day exponential moving average.
According to Shah, since the India VIX is sustaining above 19, the markets will continue to be volatile in the upcoming week. He recommends stock-specific trading and recommended Deepak Nitrite Ltd. and Indian Energy Exchange Ltd.
Benchmark equity indices logged their worst week in nearly two months, as they declined around 2%. On Friday, the indices ended higher after five sessions, led by gains in Bharat Petroleum Corp. and Hero MotoCorp Ltd.
The Nifty 50 ended 0.44%, or 97.10 points, higher at 22,054.60 and the Sensex rose 248.45 points, or 0.34%, to close at 72,652.62.
The consistent selloff by foreign institutional investors in the previous month has been a matter of concern, according to Siddhartha Khemka, head of retail research-B&D, Motilal Oswal Financial Services Ltd.
The Fed’s outlook towards an interest rate cut—which is getting delayed—and the ongoing elections, along with the voter turnout are major events affecting the sentiment of foreign investors, he said. “This has further led to profit-booking.”
In terms of the Nifty Pharma, Shah said the index is showing resistance on the higher end, along with a negative divergence on the chart. He expects near-term pain in the index and gives a support level at 18,400.
“If we breach this mark, then we will see further selling pressure towards 18,000 and 17,800 marks,” he said.
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