Bearish sentiment may rule the market this week, with many traders seeing a gap-down opening on Monday, and one senior trader even seeing the bear market lasting till March 2023. Reigning concerns this week include the US Fed’s rate hike and the SGX Nifty falling, and longer-term concerns include a weakening currency and rising bond yields.
This is based on a quick survey done at the Traders Conclave wherein most traders picked ‘bearish’ over ‘bullish’ for this week (September 26 to 30). The conclave held between September 23 and 25 was organised by Moneycontrol in partnership with Traders Gurukul.
Professional trader Rajesh Sriwastava expects Nifty to fall to 17,000 by Thursday expiry. According to him, the benchmark index will fall 20 percent from its high by this November. “We live in a global village. If there is a fire, it will catch everywhere. Global markets have fallen by 20 percent so that will happen with Nifty too.”
“There is nothing called decoupling,” he said at the Traders Conclave 2022, countering a line of thought that argues Indian markets are insulated from the tides that roil the global markets.
Rohit Srivastava, founder and market strategist of Indiacharts, took a more aggressive view and said that the bear market could last till March 2023. “Historically bear markets have lasted 15 to 24 months, and if we trace that from October 2021, then we get March 2023,” he said.
He said that a weakening currency and higher bond yields would eventually drive the markets much lower. “Most weakness in other global markets were coming from the dollar strengthening against the domestic currency and weak bond market where bond yields were going up. In India, both of these things didn’t happen till this week,” he said, adding that Nifty would initially test 16,700-16,800, and if that breaks, he would not rule out Nifty testing June lows at 15,100.
Traders such as Mohanapriya J and Muskaan Chatani were expecting the market to fall to 17,000-17,200 in the opening of the week because of the high volatility and because the market has been finding it difficult to take out the previous day’s high. “I will be shorting every fall till 17,000. After that, if that support is broken, then it can fall even to 16,300. But after 17,000, if it bounces back, it can touch 18,300. Until it touches 18,300, I will use every opportunity to sell,” she said. If Nifty touched 18,300 and sustained at that level, she would use every pullback to buy.
Muskaan would be trading slightly differently in that she wouldn’t be shorting till 17,000 but will start once the market drops below that level. If that support level was broken, she believed the market can fall even to 16,200-16,300. In that leg down, she would be shorting at every opportunity. She insisted that she is bullish on the India story and, therefore, if Nifty broke the 16,200 and headed to the June low of 15,200, then she would pause on trading and start building her investing positions.
In the current environment, the market may also see some profit booking Monday through Wednesday, said Shitij Gandhi, Senior Research Analyst (Technicals) at SMC Global. He expected Nifty to fall to 17,000-17,200 by Thursday. This Thursday, being the last one in September, is the expiry day for monthly futures and options contract.
That said, Gandhi was bullish on the market in the medium and long term. “If the Nifty falls to 16,800, I would be advising my clients to start buying on dips,” he said. He was particularly optimistic about the FMCG sector, which he expected will outperform the market in the next bull run.While the market may begin with a gap down, it may end the week with a pullback rally. Indiacharts’ Srivastava said that the market may see a short rally this weekend because the US markets seemed a bit oversold. Srivastava was basing this on the Daily Sentiment Index (DSI) that indicated that 97% of traders were bullish on the dollar, 95% were bearish on the S&P, and 93% were bearish on the US 30-year bond. “Three primary trends in the US, of falling bond markets, rising dollar and falling equity markets, have been playing out in anticipation of the Fed rate hike. Now that they have reached their near-term extremes, there will be some pullback,” he said.