"We expect the Nifty to consolidate within a broader range of 10,300–10,600 amid stock specific action as we are going through the Q4 earnings season," says Dharmesh Shah of ICICI Direct.com.
“Trend remains negative as long as it trades below 10,500.” says Jaydeb Dey, Technical Analyst at Stewart & Mackertich Wealth Management Ltd.
Trading of SGX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 40 points at the opening bell, says a report by Maximus Securities.
As per the options data, the support level for Nifty has shifted lower in the May expiry compared to last week.
The Sensex closed lower by 306.33 points at 34344.91, while the Nifty was down 106.30 points at 10430.40.
Global research firms have remained mixed on their views on the stocks. Among marquee PSU bank names such as PNB, Canara Bank they have expressed surprise on the worsening asset quality.
"The market appears to be in a correction phase with upside resistances now shifting down to 10,650–10,600 levels," says Mustafa Nadeem, CEO, Epic Research
“Don’t rule out the possibility of a counter pullback in Nifty towards 10,630 levels,” says Jaydeb Dey, Technical Analyst at Stewart & Mackertich Wealth Management
Adrian Slywotzky, author of 'Value Migration' defines the term as a flow of economic and shareholder value away from obsolete business models to new, more effective designs that are better able to satisfy customers’ most important priorities
Among put options, the 10,500 strike price still has the highest open interest of nearly 60 lakh shares.
Investors who went long on Tuesday should keep a trailing stop loss below 10500
Speaking on political risks, he expects some more choppiness on the back of political uncertainty. There are concerns whether the BJP will get the majority to form a government next year.
“Nifty’s previous support of 10,600 will act as immediate resistance. Any bounceback is likely to be capped at 10,670-10,700 levels,” says Ashish Chaturmohta of Sanctum Wealth Management.
A close below 10,560 with a bearish candle on the charts suggests the index may continue facing resistance around 10,560 and 10,630.
Considering the technical and derivative evidence discussed above, we believe that the trend of the Nifty has turned bearish for the short term.
Bears have tightened their hold on D-Street, which is evident from the fact that the widely tracked Supertrend indicator gave a sell signal on the charts on Monday.
We do not rule a possibility of US yields rising to say 4.5 percent from current 3 percent. We believe this will be a big negative for global equity markets.
Fall in crude prices and rupee against the dollar would bring some respite to investors
Rising crude oil prices will add to the inflationary pressure in the domestic economy, coupled with weakening of the rupee against the dollar and dramatic political scenario in Karnataka.
Considering negative bias for the index, it is recommended to adopt a modified put butterfly spread in the Bank Nifty to take advantage of the downside momentum.
"Nifty is heading towards 10,530 zones which might work as immediate demand zones. Range Expansion indicators is trading 96 levels thus suggesting that Nifty may enter into consolidation phase," says Rajesh Agarwal of AUM Capital.
“Weakness may persist as long as Nifty continues trading below 10,700” says Jaydeb Dey, Technical Analyst at Stewart & Mackertich Wealth Management Ltd.
Investors are advised to stay cautious but if you are long the keep a stop below 10,550 levels. A slip below this level could see Nifty cracking by 1-2 percent, suggest experts.
Two candlestick reversal patterns at an important retracement level mean that 10,915 is now an important hurdle and we are unlikely to go above it.
Bajaj Finance, IndusInd Bank, Kotak Mahindra Bank, Hindustan Unilever, Colgate Palmolive, Titan, Tech Mahindra and Tata Consultancy Service are showing strength.