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After The Bell: Day of profit taking, here’s what investors should do on Thursday

The strategy should be to buy on dips; 12,850 and 12,550 will be major support for the Nifty, while on the higher side, 12,980 and 13,050 will act as hurdles, say experts.

November 25, 2020 / 05:45 PM IST
Representative Image

Representative Image

The Nifty50 failed to hold on to gains after hitting a record high of 13,145.85 on November 25 as investors booked profits at higher levels. The BSE Sensex also reversed gains after hitting a high of 44,825.37.

The Sensex ended the day 694 points lower at 43,828 while the Nifty50 slipped 196 points to 12,858.

Sectorally, selling pressure was seen in telecom, realty, banks, healthcare, auto and consumer discretionary stocks.

The strong selloff eroded the market-capitalisation (m-cap) of BSE-listed firms. Investors lost about 2.2 lakh crore in a single day as the m-cap of BSE-listed firms dropped to Rs 172.6 lakh crore on November 25 from 174.82 lakh crore the previous day.

Experts are of the view that traders should avoid going contra as it is still a buy-on-dips market. The levels of 12,850 and 12,550 should act as a major support for the index. However, the trade could remain volatile on November 26 amid November F&O expiry.

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“The Nifty 50 index formed a big bearish candle on a daily chart and lost its entire gains of last two days ahead of November F&O expiry. The Nifty 50 index fell by 1.5 percent on the back of hefty profit booking after the recent rally that witnessed the Nifty index hitting 13k,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities told Moneycontrol.

“Globally too, we witnessed a similar trend. Monthly expiry has also mounted pressure on the market. As per the broader formation of the market, until the market breaks 12,500 levels, the short-term trend would remain corrective,” he said.

Chouhan added that the strategy should be to buy on dips. The 12,850 and 12,550 levels will act as major support for the index, while on the higher side, 12,980 and 13,050 would be the hurdles for the index.

Here is what experts think investors should do on November 26:

Ashis Biswas, Head, Technical Research, CapitalVia Global Research Limited

The market failed to show resilience to stay above the Nifty 50 Index level of 13,040. While it is subject to further price action evolution, our research suggests the technical factors are aligned to support a lackluster market movement going forward.

We expect any corrective wave down should found support around 12,890-12,860. We advise the traders to refrain from building a fresh buying position until we witness a correction till 12,890-12,860 level.

We observed volatility expanding during November 24 trading session, indicating profit booking and distribution of stocks at a higher market level.

Chandan Taparia, Derivatives & Technical Analyst, Motilal Oswal Financial Services Limited

The Nifty formed a Bearish Belt Hold or Bearish Engulfing Candle on a daily scale and negated higher lows formation after two trading sessions.

Now, it has to hold above 12,850-12,900 zones to witness a bounce towards 13,000 then 13,050 levels, while a hold below the same could see weakness towards 12,800 then 12,750 zones.

Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.

The Nifty, with a gap up opening, crossed the upper end of a dynamic rising channel on the hourly chart, however, couldn't sustain in the higher territory. The index faced sharp selling pressure there and it aggravated as the day progressed.

As a result, the Nifty formed a bearish outside bar along with an Engulfing Bear candle on the daily chart. The daily momentum indicator has triggered a bearish crossover.

These are signs of fatigue and the uptrend could be near its maturity from the short-term perspective. On the way down, the Nifty has broken its crucial hourly moving averages and the fall can continue till 12,600 in the short term.

Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities

Broader markets outperformed in the previous week, as midcap indices traded with gains while the Nifty and the Bank Nifty traded flat. Significant volatility was seen and is expected to remain elevated as well.

The immediate range for the index is seen at 12,600-13,200 with a positive bias. Buying on dips is advisable. Auto and FMCG remain preferred picks, while metals and banking expected to remain under pressure.

Vinod Nair, Head of Research at Geojit Financial services

The market rally, which was led by developments on coronavirus vaccine and FPI inflows, came to a halt on November 25 due to profit booking across sectors in the second half of the day.

While western markets continued their positivity, being encouraged by news on vaccine developments and ease in the US political risk. We can expect profit-booking to continue in the domestic market in the short term, as the liquidity-driven rally can take a pause having reached an all-time high on a monthly basis.

This money was triggered by the overwhelming result of the US election unleashing high amounts of funds which was put on hold. FIIs can take a breather and check for the next phase of policies in the US and Europe for 2021.

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.
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Nov 25, 2020 05:45 pm

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