Indian stock market indices, Sensex and Nifty 50, are likely to open on a tepid note on Wednesday amid mixed global market cues.
The trends on Gift Nifty also indicate a muted start for the Indian benchmark index. The Gift Nifty was trading around 24,550 level, a premium of nearly 10 points from the Nifty futures’ previous close.
On Tuesday, the domestic equity indices witnessed a strong selloff and ended sharply lower by over a percent each.
The Sensex crashed 930.55 points, or 1.15%, to close at 80,220.72, while the Nifty 50 settled 309.00 points, or 1.25%, lower at 24,472.10.
Nifty 50 formed a long bear candle on the daily chart, which is indicating an attempt of decisive downside breakout of 24,600 - 24,500 levels.
“After the formation of a series of higher tops and bottoms on the daily chart in the last few months, Nifty 50 is currently weakening after forming a new lower top around 25,230 levels. This is a negative indication and signals ongoing downward correction. Another crucial weekly cluster support around 24,500 (ascending trend line, 23.6% retracement and weekly 20 period EMA) is placed at the verge of downside breakout,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
According to him, the short-term trend of Nifty 50 continues to be negative and a decisive move below 24,500 - 25,450 levels is likely to open the next downside target of 24,000. Any rise up to the immediate resistance of 24,700 could be a selling opportunity, he added.
Here’s what to expect from Nifty 50 and Bank Nifty today:
Nifty Open Interest (OI) data shows the highest OI on the call side at the 24,600 and 24,700 strike prices, signaling strong resistance levels. On the put side, OI is concentrated at the 24,400 and 24,300 strike prices, highlighting these as key support levels, said Hardik Matalia, Derivative Analyst at Choice Broking.
According to Dr. Praveen Dwarakanath, Vice President of Hedged.in, options writer’s data for this month's expiry showed increased call writing at 24,500 and above levels and short covering in ITM puts, indicating downside momentum to continue.
Nifty 50 witnessed sharp weakness on October 22 and closed the day lower by 309 points, below the 24,500 level.
“Overall, the short term structure for the market has weakened and on the lower side index can gradually move towards 24,200 / 23,940 levels. On the higher side, 24,700 / 24,840 will act as a stiff resistance zone for the index and move towards those levels can be used to reduce long exposure and increase short positions,” said Aditya Agarwal, Head of Derivatives & Technical Analysis at Sanctum Wealth.
Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas noted that on the daily charts, Nifty 59 has slipped decisively below the 20-week average (24,718) which is a sign of weakness.
“Daily and hourly momentum indicators possess a negative crossover which is a sell signal. Thus, both price and momentum indicators suggest weakness. On the downside, we expect the Nifty 50 to drift towards 24,000 where there is a high concentration of open interest on the put side implying support. On the upside, 24,900 – 25,000 shall act as a crucial resistance from a short term perspective,” Gedia said.
VLA Ambala, Co-Founder of Stock Market Today said she has a bearish view for the next few days and advised traders to approach a ‘sell on rise’ strategy.
“The Nifty 50 has corrected nearly 7% and selling pressure could remain. However, Nifty, which is in the overbought zone with an RSI of 70, could fall to 60-55 in the coming weeks. Currently, the RSI of Nifty shows 33 on the daily and 53 on the weekly timeframe, forming a Bearish Marubozu candlestick pattern. Amid these, Nifty could expect support near 24,320 and 24,000 and resistance near 24,510 and 24,585,” Ambala said.
Bank Nifty index plunged 705.55 points, or 1.36%, to close at 51,257.15 on Tuesday, and formed a long bearish candle on the daily chart.
According to Aditya Agarwal, on the lower side, Bank Nifty will find immediate support around 51,000 / 50,800 levels and can see pullback from those levels. However, on the higher side 52,000 / 52,250 will be a strong supply zone for the index and from those levels profit booking can be expected.
Meanwhile, the Bank Nifty index saw a big fall from the opening price of Tuesday and never recovered during the day, indicating weakness in the index.
“On the weekly chart, the momentum indicators suggest a downside as well. On the weekly chart, the ADX average line is well below 20 levels with the ADX DI- line on top of the ADX DI+ line, if the ADX average line slopes up, an indication of further downside is likely possible. Options writer's data showed increased writing in calls above 51,500 levels in the monthly expiry, indicating strong resistance at the 51,500 level before the expiry,” said Dwarakanath.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
