The Indian market on August 31 saw its biggest fall in three months, pushing benchmark indices below their crucial levels. The S&P BSE Sensex broke below crucial levels of 40,000 and 39,000 while the Nifty50 failed to hold on to 11,400.
The Nifty snapped a six-day winning streak to close 260 points lower at 11,387, a fall of 2.2 percent. This is the first biggest drop after May 18 when the index plunged 3.4 percent.
Sectorally, selling pressure was seen in realty, healthcare, utilities, power, and capital goods space. The broader markets followed the benchmarks as the S&P BSE Midcap index was down 3.7 percent and the smallcap index fell 4.3 percent.
Going forward 11,794 is likely to act as a crucial resistance level for the Nifty.
“The Nifty50 registered a Long Black Day kind of formation and appears to have decisively reversed its course of direction by erasing the last six sessions of laborious gains put up by the bulls,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
It was critical that the Nifty sustains above 11,325. "In that scenario, some sideways consolidation can be expected in the next trading session but the breach of 11,325 can initially drag the Nifty towards 11,111 levels,” he said.
Traders should remain neutral on the long side, whereas positional shorting can be considered either on rallies in the 11,559- 11,614 zone or on a close below 11,325 for a target of 11,111.
Also Read: Gainers & Losers: 10 stocks that moved the most on August 31
We have collated views of experts on what investors should do on September 1 when the market resumes trading:
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities
A tsunami of negative news shook the entire market, with the Nifty losing over 2 percent to end the day in the red.
The implementation of new margin norms from September 1, clashes between India and China along the Line of Control, the possible sharp contraction in India's GDP, the highest number of COVID-19 cases in a day, and concerns of the virus spreading to rural India all contributed to the fall in the index that broke the lowest level in the last six days.
Positive signals from the global market couldn’t help the recovery in the Indian market that saw the Nifty and the Sensex close at the lowest level of the day.
From September 1, the Nifty’s trend would completely depend on how the new norms on margin are adapted in the market. The Nifty would trade between 11,100 and 11,500.
Chandan Taparia, Motilal Oswal Financial Services Limited
On the options front, maximum Put OI is placed at 11,000 followed by 10,500 strikes, while maximum Call OI is placed at 12,000 followed by 11,500 strikes.
We have seen marginal Call writing in 11,700 and 11,500 strikes while Put unwinding is seen at immediate strike. Options data suggests a positional wider trading range in between 11,000 to 11,800 zones.
The Bank Nifty opened positive beyond 25,000 zones but witnessed a sharp selling pressure of around 1,800 points from its intraday high of 25,200 zone to 23,400 zone.
It formed an Outside Bar along with a Dark Cloud Cover pattern on a daily scale, which indicates that now the bears are attacking from a higher zone after a decent rally of the last two weeks.
It has negated the formation of higher lows on a daily scale and lost most of its previous day’s gain. The index has to cross and hold above 24,000 for a move towards 25,000-25,200 zone, while on the downside, key support exists at 23,200 level.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities
The upside breakout of intermediate resistance of 11,450-11,500 as per change in polarity (trend line resistance as per weekly/monthly chart) has turned out to be a false downside breakout as of now. This is a negative indication.
The short term trend of the Nifty seems to have reversed. Follow-through weakness is expected to confirm this reversal pattern.
We expect to sell on rise opportunity on any upside bounce back attempt at around 11,450-11,500 levels. One may expect further weakness in the short term and the next lower levels to be watched at 11,100-11,000.
Ajit Mishra, VP - Research, Religare Broking Ltd
As per the latest update, the talks are on to resolve the border issue and further escalation could derail the prevailing uptrend.
Besides, the market will react to GDP numbers in early trade on September 1. Technically, a decline below 11,300 in the Nifty will reverse the short-term uptrend.
In case of a rebound, it will find it difficult to cross the 11,500-11,550 zone. We suggest using rebound to reduce longs positions and adding a few shorts through options trades.Disclaimer
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