Mumbai: The markets finally witnessed a healthy correction on Thursday as global cues turned negative. The US-based Dow futures were seen trading with a loss of over 3 per cent, which had a cascading effect on other world markets. Back home, the Supreme Court has asked telecom companies to submit their plans on how and when they plan to pay the AGR dues, the next hearing is slated for June 18. The Supreme Court tomorrow will also be hearing a plea on interest charged by banks on loan moratorium, the verdict may have an impact on the banking shares.
The BSE benchmark index, the Sensex, started the day with a modest loss of 35-odd points at 34, 219 after the initial choppiness the BSE index began to slide post late morning deals. The selling intensified towards the close of the trading session as a result of which the Sensex tumbled to a low of 33,480, and finally ended with a sharp loss of 709 points at 33,538.
Among the Sensex 30 stocks, SBI and Sun Pharma plunged over 5 per cent each. Maruti, Bajaj Finance, ICICI Bank, Tata Steel, Axis Bank, Tech Mahindra, Bharti Airtel and Titan were the other significant losers, down 3-4 per cent each. IndusInd Bank, however, bucked the trend and was up over 4 per cent.
The BSE Sensex has given a fresh sell signal on the weekly Fibonacci chart, thus indicating further downside for the week. As per the weekly Fibonacci chart, the BSE index has broken the S2 (support) level on Thursday. Hence, the index may now test the weekly S3 placed at 33,290. However, one must remember that the Sensex has given a strong buy signal on the monthly chart, as per that, the BSE index is likely to get significant support in the 33,050-32,850 range. In simpler words, the bias for this month is likely to remain positive as long as the Sensex sustains above 32,850.
Also Read: Market Outlook: Expect choppiness to continue as Nifty eyes 100-DMA
As per the daily Fibonacci charts, on Friday, in case of an up move the BSE Sensex is likely to face resistance around 33,820-33,910-34,000, and in case of a down move, the BSE index may seek support around 33,250-33,170-33,080.
With today’s over 2 per cent fall at 9,902, the NSE Nifty has declined almost 4.5 per cent from its recent peak of 10,338. It may be recalled that the NSE index had rallied 1,532 points from its low of 8,806 on May 18, to a high of 10,338 on June 8. In a market correction, the underlying index/ security tends to retrace 38.2%-50%-61.8% of the previous move. Thus, we can expect the index to retrace up to 9,750-9,570-9,390, which could still be a healthy correction.
The current phase seems to be a corrective action within an up move, hence one needs to look out for buying opportunities on dips towards the major support levels. The uptrend is likely to remain intact as long as the Nifty sustains above the 20-DMA (Daily Moving Average) which is around 9,550. On the upside, the Nifty may look to conquer its 100-DMA as long as the trend remains positive.
Among the key momentum oscillators, the 14-day RSI (Relative Strength Index) has seen a decent correction. The MACD (Moving Average Convergence Divergence) too is flattening out. The DI (Directional Index) continues to remain in favour of the bulls, even as the bears seem to be raring to may a comeback. On the flip side, the Slow Stochastic remains negative.
Disclaimer: The article is for information purpose only and does not advocate any buy or sell /recommendation.
