The charts of benchmark Nifty 50 index are showing more downside in the months ahead, according to technical analyst Rohit Srivastava, who sees a wave of selling pressure gripping global equity market.
Speaking to CNBC-TV18, IndiaCharts founder Rohit Srivastava said the one of his indicators are capturing only 6% stocks in its coverage universe as showing positive momentum right now. "Over next two-three months, we will see selling pressure, and it is likely to become global," he added.
Rohit Srivastava said a market selloff may be looming around the corner. "Going ahead, like it happened in 2022, we may get a peak in December-January period when extra cash gets allocated to funds. We start the new year on a clean book, and then it sells off."
Global Selloff Coming?
IndiaCharts analysis showed that Indian equities seem to have possibly topped out ahead of other major global indices. "The October top of 26,277 on Nifty 50 is where we fell from and we may not see that level very soon. The US market over the last two weeks has been showing those kind of readings, based on several parameters."
Rohit Srivastava said that the global markets may now surprise us on the downside. "Everyone had turned optimistic on US stocks after the US Presidential election and the Fed rate cut, and this needs to cool off," said Srivastava.
On Thursday, the US rally that shot Nasdaq 100 to all-time highs paused, possibly as bets were held off ahead of Federal Reserve’s policy meeting next week. S&P 500's strong 27% YTD return has only seen a handful of companies participate, increasing concerns among US analysts. Bloomberg data showed that the S&P 500 gauge is nearly its ninth day of weak market breadth, the longest such streak since at least 2004.
The BSE Mid and Smallcap indices had been showing upward momentum earlier this month, however, the index has come under some selling pressure. A persistent weakness here could signal further downside for the equity market. "We may re-test recent lows in March," he said.
"In 2021, Nifty topped out in October, and in January 2022, the smallcap index made a new high, while Nifty did not. Usually, these kind of inter-market divergences are seen as technically negative," said Rohit Srivastava, adding that he has been holding a bearish view on the market since October.
IndiaCharts also noted that the long positions by FIIs in index futures was at the highest level since 2016, a sign of 'excessive bullishness'. "That, coupled with a technical sell sign, shows the index probably needs to go down more, to unwind those (index futures) positions."
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