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Technical View | Nifty forms bearish candle, needs to defend March low of 15,671

If the Nifty slips below 15,671 in the coming sessions, it can fall to 15,000, experts have said

May 12, 2022 / 06:28 PM IST

The Nifty continued to be in a downward spiral, with the index crashing 2 percent, tracking a sharp downtick in global counterparts after US inflation for April came in higher-than-expected, triggering worries of a faster policy tightening by the Federal Reserve.

Traders also turned cautious ahead of India’s CPI inflation print for April and industrial output data for March.

Retail inflation surged to 7.79 percent in April, the highest since May 2014, data released by the Ministry of Statistics and Programme Implementation in the evening showed. At 7.79 percent, the Consumer Price Index  inflation print for April is 84 basis points higher than the March’s 6.95 percent.

India's industrial growth, as per the Index of Industrial Production (IIP), edged up to 1.9 percent in March from 1.5 percent in February.

Bear grip

Close

After opening sharply lower at 16,021, the Nifty extended losses to sink to the day's low of 15,736. The index settled at 15,808, down 359 points, or 2.2 percent.

As the index closed way below the opening tick, it formed a bearish candle on the daily charts. The index has to defend the lows of March (15,671) in coming sessions or it can slip to 15,000, experts said.

"Bears seem to be in complete control of the markets as the Nifty50 index shed another 2 percent to register a new corrective swing low on a closing basis," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.in said.

Also read: Taking Stock | Sensex tanks 1,158 points on inflation worries; Nifty below 15,850

"In case if it settles below 15,671 levels then eventually the weakness shall extend towards a logical target of 15,041 levels," Mohammad said.

Upsides should not be expected unless the index consolidates for a couple of sessions around a particular point, he said.

On the option front, maximum Call open interest was seen at 17,000 strike, while maximum Put open interest was witnessed at 16,000 strike followed by 15,500 strike.

Marginal Call writing was seen at 16,000 strike followed by 16,500 strike, while Put writing was seen at 15,900 strike followed by 15,600 strike.

Also read: Gainers & Losers: 10 stocks that moved the most on May 12

The options data indicates that the Nifty’s trading range has moved further lower to 15,500-16,300 from 15,800-16,500 levels.

Volatility continues to be high and crossed 25 intraday, the highest level since March 24. India VIX, the fear index, rose 6.41 percent to 24.27.

"Market shall remain uncertain unless VIX cools off," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.

Banking index

The Bank Nifty opened negative by 400 points and lost all its relative strength. The index slipped sharply to hit the day's low of 33,298. It formed a strong bearish candle on daily frame and closed 1,161 points lower at 33,532.

"Till the index holds below 34,000, it may see weakness towards 33,000 and 32,500, whereas hurdles shifted lower to 34,000 and 34,350," Taparia said.

On the stock front, positive setup was seen in Gujarat Gas, Ambuja Cements and Gujarat State Petronet. Weakness was seen in PNB, Adani Ports, RBL Bank, Federal Bank, IDFC First Bank, Vodafone Idea, IndusInd Bank, Bank of Baroda, Tata Chemicals, Shriram Transport and IRCTC.

The broader market, too, remained under pressure, with the Nifty midcap 100 and smallcap 100 indices falling 2.3 percent and 1.9 percent.

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.



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Sunil Shankar Matkar
first published: May 12, 2022 06:28 pm
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