A morning walk down Dalal Street | All eyes on state election results, RBI Governor's resignation to weigh in

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Bloodbath on D-Street! Well, bears took control of D-Street from the word go as Sensex and Nifty recorded their biggest 1-day fall in the past 2-month. The Nifty50 has turned negative for the year 2018.

Both Sensex and Nifty gave up their crucial support levels. The S&P BSE Sensex breached below its crucial support placed at 35000 while the Nifty50 broke below 10,500 levels which suggests more pain ahead.

Weak global cues, reactions to exit polls as well as weak rupee weighed big on Sensex and the Nifty. The final tally on D-Street: The S&P BSE Sensex plunged by 713 points to close at 34,959 while the Nifty50 closed 205 points down at 10,488.

Investors lose Rs 2.64 lakh crore as Dalal Street bleeds; realty stocks hit the most

The Indian rupee on December 10 tumbled 50 paise to close at 71.32 against the US dollar as nagging worries on the global trade war front and uncertain crude prices hurt forex market sentiment.

On the institutional activity, FPI buys Rs 116 cr in Indian markets while DIIs sold Rs 145 crore, according to provisional data.

Big News:

Well, there is plenty to react today. After witnessing bloodbath on Monday, it will be a volatile day for markets. D-Street will first react to Dr. Urjit Patel's resignation as the RBI Governor which may create a temporary flutter in the markets, apart from that outcome of state polls is likely to chart the direction of markets.

Global headwinds like escalating trade war between US & China, Britain’s Parliamentary vote on Brexit and fears of a slowdown in global economic growth in 2019 has already led to a sharp spike in risk aversion for risk assets like equities.

Global investment banks such as Nomura, Deutsche Bank, and CLSA feel that the exit polls might have got BJP thinking on its strategy but the final outcome will be very different.

“If the BJP ends up losing 2 of these 3 states, it will be a negative for market sentiment. Farmers’ demands & jobs are going to be the top 2 issues for the 2019 elections,” said a CLSA note.

Technically speaking, post result outcome on Tuesday, if Nifty50 settles below 10450 levels then on the downside next logical target shall be placed around 10191 levels

Similarly on the upside further strength shall be expected only on a close above 10750 levels.

Technical View:

Nifty formed a bearish candle on daily charts

The Nifty50 closed below psychological 10,500 levels, forming bearish candle on the daily charts.

Experts expect the correction to continue and if Nifty50 settles below 10,450 levels post the election outcome then on the downside next logical target shall be placed around 10,191 levels breach of which shall eventually threaten the October lows of 10,000.

Max Call OI: 11000, 11500

Max Put OI: 10,000, 10200

Technical Recommendations:

We spoke to HDFC Securities and here’s what they have to recommend:

ABB India Ltd: Buy| LTP: Rs 1397| Target: Rs 1480 | Stop-Loss: Rs 1350 | Return 6%

Dr Reddy's Laboratories Ltd: Buy| LTP: Rs 2690| Target: Rs. 2825 | Stop-Loss: Rs 2600 | Return 5%

Berger Paints Ltd: Buy| LTP: Rs 305| Target: Rs. 325 | Stop-Loss: Rs 293 | Return 7%

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.