For time being traders are advised to avoid long positions unless Nifty closes above 12020 levels whereas positional traders with a high-risk appetite can consider shorting on a close below 11900 levels.
Indian markets took a breather after rallying for 10 consecutive sessions in a row on October 15, largely led by losses in IT and banking stocks.
The Sensex shed 1,066.33 points or 2.61% at 39728.41, while Nifty fell 290.60 points or 2.43% at 11680.40.
Sectorally, the selling pressure was visible in Telecom, IT, Banks, Healthcare, and Finance stocks.
Weak global cues:
Indian market opened amid muted global cues. Stocks in Europe fell for the third consecutive session in early trading, taking their queue from weaker markets in Asia overnight, and a weak close seen on Wall Street.
The pan-European STOXX 600 was down 1.7% to a near two-week low, with markets in London and Paris lower 1.4%-1.7% and Frankfurt and Milan 2%-2.5% weaker, said a Reuters report.In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.6% while Japan's Nikkei .N225 dropped 0.5%, it said.
Stimulus expectations fade:
Overnight, US markets ended lower as investors lost hope that a U.S. fiscal stimulus would be approved before the presidential election in November.
Downbeat comments from Treasury Secretary Steven Mnuchin that a deal would not likely be made before the vote added to fragile sentiment following a mixed bag of quarterly earnings reports from major Wall Street lenders, said a Reuters report.
The market rallied for the 10 consecutive days on a trot and was looking overbought. Some technical correction was on the cards, suggest experts. However, a dip can be used as buying opportunity as long as it does not violate 11800 levels.
The Nifty50 had a touch-&-go moment with 12000 but failed to hold onto the momentum as traders prefer to book profits at higher levels.
“A close below 11800 can accelerate the selling pressure by tilting the tide in favour of bears thereby ushering in the much-needed correction. In case if Nifty registers a close above 12022 levels then the upward swing can get extended towards 12200 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“For time being traders are advised to avoid long positions unless Nifty closes above 12020 levels whereas positional traders with a high-risk appetite can consider shorting on a close below 11900 levels with a tight stop above 12030 levels and look for much bigger targets,” he said.
IT & Banking stocks:
In terms of sectors, IT and Banking stocks lead the decline which were outperformers of the rally seen in the last 10 trading sessions.
The Nifty IT index slumped nearly 3 percent on Thursday, after rallying by about 6 percent this month on the back of strong quarterly results and buybacks.
Fresh Lockdown globally:
Governments across Europe tightened restrictions to battle an accelerating second wave of COVID-19 infections, dampening the prospects for economic recovery, said a Reuters report.
France imposed curfews while other European nations are closing schools, canceling surgeries and enlisting student medics as overwhelmed authorities face the nightmare scenario of a COVID-19 resurgence at the onset of winter, added the report.
The report further added that with new cases hitting about 100,000 daily, Europe has by a wide margin overtaken the United States, where more than 51,000 COVID-19 infections are reported on average every day.
(With inputs from Reuters)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.