Market Outlook: Sensex, Nifty likely to witness more downside

Mumbai: Today, was rather a contrast day when compared to what happened in trading on Monday, as the markets opened lower and attempted a recovery as the day progressed. The BSE benchmark index, as expected, touched a new low for the month at 30,845, and then recouped some of the losses aided by buying in select index heavyweights on hopes of some positive announcement by PM Modi later tonight.

The BSE index came within striking distance of its previous days close, as the index touched a high of 31,537, but eventually failed to surpass it and ended 190 points lower at 31,371.

Among the Sensex 30 stocks, Reliance Industries was the major laggard, the stock tumbled over 6 per cent to Rs. 1,480 on account of profit-taking following its recent sharp rally. Asian Paints, Kotak Bank, Hindustan Unilever, HDFC Bank and ONGC were the other major losers down 1-3 per cent each.

On the positive front, NTPC soared nearly 6 per cent to Rs. 91.60. Heavyweights Bharti Airtel and ITC rallied over 4 per cent each. IndusInd Bank, PowerGrid Corporation, Bajaj Finance, Bajaj Auto, Titan, Axis Bank, Hero MotoCorp and HDFC were also up 1-3 per cent each.

Among sectoral indices, the BSE Energy index slumped 5 per cent dragged by Reliance. The Oil & Gas index too was down over 2.5 per cent. Bharti Airtel’s strong gains aided the Telecom index surge over 4 per cent. The Power index was the other prominent gainer, up 2.3 per cent.

The market breadth was fairly negative – out of 2,451 stocks traded on the BSE, 1,416 declined and 870 advanced. Also, mere 31 stocks recorded a fresh 52-week high in trade today, while 102 stocks touched a new 52-week low.

The Sensex has fulfilled one of it’s criteria of registering a fresh monthly low, however the index does not seem to have taken any support as per the monthly Fibonacci chart. On the contrary, the BSE index has broken it’s S2 on the weekly Fibonacci chart. Thus, highlighting the possibility of some more downside this week.

The next key support for the Sensex could be around 30,660 which is the weekly S3 level, below which the downside target for the Sensex remain intact around the monthly Fibonacci S2 and S3 levels placed at 30,525 and 29,770, respectively. On the positive front, if the BSE index is able to sustain above 31,640, we may witness a pull back rally towards the weekly high.

On Wednesday, as per the daily Fibonacci charts the BSE Sensex may seek support around 31,105-31,025-30,945, while in case of an up move the BSE index may face resistance around 31,635-31,715-31,800.

After days of defending the 20-DMA (Daily Moving Average) the Nifty for the first time since April 8 has ended below its 20-DMA. More importantly, so far on the weekly charts the NSE index has also made a lower high and lower low for the week, thus indicating selling pressure at higher levels.

The Nifty ended a shade below its 20-DMA (9,240) at 9,196, which now can act as an immediate resistance. Yesterday, it was mentioned that the index may dip towards the 9,000-mark, the index touched a low of 9,044 in trade today. Now, the next logical support for the index is the trend line support at 8,980 and the lower end of the daily Bollinger Band around 8,830-odd level.

While the Nifty seems to be drifting the lower, select key momentum oscillators are still in benign mode, thus making any directional move susceptible to a reversal.

Among the key momentum oscillators – the Slow Stochastic and the MACD (Moving Average Convergence Divergence) remain inconclusive, while the 14-day RSI (Relative Strength Index) too remains in neutral mode. However, there is minor negative divergence on the DI (Directional Index) even while the ADX (Average Directional Index) remains tepid. Hence, one needs to wait for a confirmed breakout from the trading range for a fresh trend to emerge.

Disclaimer: The article is for information purpose only and does not advocate any buy or sell /recommendation.