The Nifty50 saw its fourth-biggest loss in absolute terms and formed a large bearish candle that resembled a Long Black Day formation on the daily charts on February 26, the first day of the March series.
After opening gap down at 14,888.60, the index extended losses to hit the day's low of 14,467.75. It signed off the session at 14,529.20, down 568.20 points or 3.76 percent.
Year-high US bond yields, which raised fears of FII outflow, and rising oil prices hit the sentiment as the index declined 3 percent for the week.
Banking & financials were the biggest losers, followed by auto, IT, FMCG and metals. The Nifty midcap 100 and smallcap 100 indices fared better than the benchmarks, falling 1.6 percent and 1.2 percent, respectively. The Sensex and the Nifty tanked 4 percent each.
The market breadth was largely in the favour of the bears with a 2:1 ratio.
Given the strong reversal, if the Nifty breaks 14,300, then it can fall below the 14,000-mark in the coming sessions, experts said.
The trend seems to have decisively turned in favour of the bears, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol. He advised positional traders to short the rally, preferably in the 14,650-14,700 zone, with a stop above 14,920 on a closing basis and look for bigger targets.
"Interestingly, today's gap-down opening as a follow-through to the last Thursday's gap-up opening resulted in a bearish formation called Abandoned Baby on candlestick charts, which is popularly known as island reversal in conventional technical charting," Mohammad said.
It was inevitable that the index would revisit and bridge the bullish gap zone, registered on February 2, present between 14,469–14,336 levels, he said.
Apart from the said gap area, there seems to be a confluence of additional support points in this zone like the 50-day exponential moving average, with a value present around 14,400 levels, he said. "Hence a near-term bounce can be expected from the zone of 14,460 to 14,300 levels."
But as the tide seems to have turned in favour of the bears, a close below 14,300 can eventually drag the index to 13,960, he said.
India VIX moved up sharply by 22.95 percent from 22.89 to 28.14, indicating a tight grip of the bears. VIX touched the intraday high of 29.64, its highest levels in 169 trading sessions.
Since it is the beginning of a new series, the options data was scattered at different strikes. Maximum Put open interest was at 14,000 followed by 13,500 strike, while maximum Call open interest was at 16,000 followed by 16,500 strike. The data indicates that the Nifty could see a trading range of 14,000-15,000 in the coming sessions.
The Bank Nifty opened gap down at 35,806.65 and hit the day's low of 34,658.70. Weakness across the street swept the banking index, which ended the day 1,745.40 points, or 4.78 percent, lower at 34,803.60.
The index, which corrected 2.9 percent for the week, formed a strong bearish candle on daily and weekly scales.
"Till the Bank Nifty remains below 35,500 levels, weakness could be seen towards 34,000 and 33,333, while on the upside, key hurdle is seen at 36,000," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stock front, a bullish setup was seen in SAIL, NACLO, Tata Chemicals, Colgate Palmolive, BHEL, Escorts, Lupin and Tata Power. Weakness was seen in RBL Bank, Berger Paints, Kotak Mahindra Bank, GAIL India, M&M, Havells, Hero MotoCorp, HDFC, HDFC Bank, Bajaj Finance, L&T, PVR, Tech Mahindra, Indraprastha Gas, Bajaj Auto, UBL, TCS, Marico and ITC, he added.