For the time, traders should avoid buying the dip in haste whereas intraday traders can short below 12,740 and look for a target of 12,650 by placing a stop above the intraday high.
The bears took control of D-Street on November 19 from the word go and the selling pressure extended in the second half of the trading session, pushing the S&P BSE Sensex lower by nearly 600 points and the Nifty50 below 12,800.
The Sensex closed 580 points down at 43,599 while the Nifty50 closed 166 points lower at 12,771.
Sectorally, the selling pressure was visible in banks, finance, telecom, realty and metal stocks while some action was seen in consumer durables, power, and FMCG stocks.
Experts are of the view that investors should tread cautiously as a rise in COVID cases pushed investors to book profits at higher levels.
"The increasing virus infections raised fears of additional restrictions and considering its impact on global economic activity, global market sentiments turned negative. This was in spite of the optimism surrounding the advanced stages of vaccine development. Indian markets also witnessed profit booking from recent highs, as investors turned cautious,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
“Financials led the losses while defensive sectors such as FMCG and pharma fared better. The positivity in auto sales numbers continued and could be an indicator of economic recovery,” he said.
Nair added that increasing virus infections, which is again being reported in some parts of India, can offset this nascent recovery. We can expect short-term volatility in the markets and investors are advised to remain cautious.
Here is what experts think that investors should do on November 20:
Ashis Biswas, Head of Technical Research, CapitalVia Global Research Limited
The market continues to show a lack of upside momentum around the resistance zone of the Nifty 50 Index level of 12,930-12,950. As of now, both the momentum indicators RSI and MACD are showing negative divergence.
We expect anything below 12,750 could open the gates for a movement till 12,510-12,520 level. From a short-term perspective, we retain our cautious stance as we see the current rally is not supported by other bullish technical evidence.
Arjun Yash Mahajan, Head-Institutional Business at Reliance Securities.
Domestic equities witnessed a sharp fall as fear of economic restrictions after the closure of the public school system in New York resulted in profit booking across all markets. In our view, after seeing such a sharp rally since the beginning of November, profit booking was very much anticipated. Financials witnessed a steep correction on November 19.
The correction is not very surprising. As the underlying strength of the market in the context of consistent recovery in economic activities and corporate earnings are intact, any such correction should be used to take positions in quality stocks with decent margins of safety.
Keshav Lahoti, Associate Equity Analyst, Angel Broking Ltd
After the sharp rally of the last few days, we are a bit cautious on the market. We advise investors to have quality stock in their portfolio with strong revenue visibility at a reasonable valuation.
Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in
If the index settles below 12,800 on a closing basis in the next session, then it may kick in much-needed corrective downswing with initial targets of 12,600 levels.
Unless the bulls make a strong come back in the next session with a close above 12,850, upsides shall remain capped around 12,963 levels.
For the time, traders are advised to avoid buying the dip in haste whereas intraday traders can short below 12,740 levels and look for a modest target of 12,650 by placing a stop above intraday high.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.