Indian stock market indices, Sensex and Nifty 50, are likely to open flat on Tuesday as investors remain cautious amid mixed global cues after hawkish comments from the US Federal Reserve Chairman Jerome Powell.
The trends on Gift Nifty also indicate a flat start for the Indian benchmark index. The Gift Nifty was trading around 26,000 level, a premium of nearly 10 points from the Nifty futures’ previous close.
On Monday, the domestic equity indices ended more than a percent lower each, with the benchmark Nifty 50 falling below 26,000 level.
The Sensex crashed 1,272.07 points, or 1.49%, to close at 84,299.78, while the Nifty 50 settled 368.10 points, or 1.41%, lower at 25,810.85.
Nifty 50 formed a long bear candle on the daily chart with a gap down opening.
“Technically, this chart pattern is indicating a bearish reversal type candle pattern (type of bearish evening star-not a classical one). This market action is also signaling a short term top reversal action for the Nifty 50 and expect some more weakness in the coming sessions. Bullish higher tops and bottoms is intact on Nifty as per daily timeframe chart. Present weakness could be in line with the new higher bottom of the sequence,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
Shetti expects Nifty 50 to find support around 25,500 - 25,400 and the market is likely to bounce back from the lows.
Here’s what to expect from Nifty 50 and Bank Nifty today:
In terms of open interest (OI), the highest call-side OI was at the 26,000 and 26,200 strike prices, while the highest put-side OI was concentrated at the 25,500 strike price, indicating strong support around the 25,600 level for Nifty, said Mandar Bhojane, Technical Research Analyst at Choice Broking.
Nifty witnessed sharp profit booking on September 30 and closed the day lower by 368 points below the 26,000 level.
“The Nifty 50 slipped sharply following a brief pause in the previous trading session, breaking below its recent consolidation. This decline was accompanied by a significant negative divergence in the RSI (14), indicating potential further weakness. Sentiment may remain weak in the near term, with support placed at 25,750,” said Rupak De, Senior Technical Analyst, LKP Securities.
According to him, a break below 25,750 could lead to further correction and on the higher side, resistance is seen at 26,000.
Dr. Praveen Dwarakanath, Vice President of Hedged noted that RSI and stochastics establish negative divergence on the daily chart, indicating weakness in the index.
“The sudden fall can also be because the ITM puts of October-end expiry were covered during the day, which could have led to a quicker fall. Immediate support for the index is at 25,800 levels, if broken below this, it can slip to 25,500 and 24,800 levels soon. The Options writer’s data for this week’s expiry shows increased writing in calls, however, in October’s expiry ITM puts saw short covering, indicating weakness in the index,” said Dwarakanath.
Bank Nifty index plunged 856.20 points, or 1.59%, to close at 52,978.10 on Monday.
“Bank Nifty was much weaker than nifty owing to the formation of a possible negative divergence in the weekly time frame. If Bank Nifty closes at present levels or below by the end of the week, a clear negative divergence is established, indicating a possible further fall. Although weaker than Nifty, Bank Nifty has been taking support on the Upper Keltner channel on the weekly time frame, a close below this will ascertain a downside for the index,” said Dwarakanath.
Immediate support for the index continues to be at the 52,800 level, likely to be broken. Options writer's data for the present week's expiry shows increased call writing at 53,000 and above levels, indicating weakness in the index, he added.
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