The Nifty50 fell more than 250 points to close at an almost a two-month low on May 6, following a sharp downtick in global counterparts amid fear that aggressive rate hikes by central banks to tame inflation may dampen global growth.
The index has formed a Doji candle on the daily charts as the closing was near opening levels, indicating indecisiveness among bulls and bears, but there was a large bearish candle formation on the weekly scale as the closing was higher than opening levels. Experts feel the consistent weakness for a fourth consecutive week could be a clear indication of bears' dominance in the market, which could bring down the index to 16,150-16,000 levels.
The volatility climbed above the 21 mark again, indicating the trend may be in favour of bears which could discomfort bulls. India VIX, which measures expected volatility in the market, jumped 4.71 percent to 21.25 levels.
The Nifty50 opened sharply lower by more than 260 points at 16,416 and corrected up to 16,341, the intraday low. The index showed a bit of recovery in late trade and settled at 16,411.30, the lowest level since March 9 this year, down 271 points or 1.63 percent on Friday.
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The index lost 4 percent during the week.
"Nifty50 continued its weakness with yet another gap down opening with a decent bear candle on the weekly charts for the fourth week in a row, emphasising the clear cut bear domination," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
In this process, he said it also bridged the bullish gap present between 16,447 and 16,418 levels, registered on March 10, which was supposed to act as a support point. Hence, remaining below 16,400 levels next logical target for the index shall be around 16,150 levels, he added.
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In between, the market expert said any pullback attempt may perish around 16,650 levels unless the index registers a strong close above the Friday's bearish gap zone present between 16,484 and 16,651 levels. As the trend is clearly on the downside, strength can be an opportunity to create fresh short positions, he advised.
After the consistent sharp weakness in the market, the wider trading range indicated by option data has shifted lower from 16,000 to 16,800 levels due to higher volatility, from 16,400-17,000 earlier.
On the option front, maximum Call open interest was seen at 17,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,500 strike then 16,000 strike. Marginal Call writing was witnessed at 16,800 strike followed by 17,000 strike while Put writing was seen at 16,500 strike then 16,700 strike.
The broader markets also fell in line with benchmarks with weak breadth. The Nifty Midcap 100 index dropped 1.8 percent and Smallcap 100 index plunged 2.5 percent. About five shares declined for every share rising on the NSE.
Bank Nifty opened gap down in line with the weak global market, at 34,569, and remained weak with the emergence of selling pressure at every small bounce. It remained consolidative after a negative opening and then closed at 34,591 levels with losses of 642 points.
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It formed a Doji candle on the daily scale as it closed near its opening zones while there was a bearish candle on a weekly scale. "Till it holds below 35,000 levels, a bounce could be sold and weakness could be seen towards 34,250 and 34,000 levels whereas resistances are placed at 35,250 and 35,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stocks front, Taparia said a positive setup was seen in Hero MotoCorp, Tech Mahindra, Power Grid Corporation of India, ONGC, Colgate Palmolive, NTPC, Petronet LNG, ITC, and Coromandel International.
However, weakness was seen in Vedanta, Cholamandalam Investment, Voltas, Deepak Nitrite, Info Edge, Astral, Bajaj Finance, Divis Labs, Motherson Sumi, SRF, Axis Bank, SAIL, Tata Motors, Hindalco, L&T Infotech, MCX, Dabur and IndiaMART InterMESH, he added.
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