The week has begun on a strongly negative note with Indian markets falling by ~1.5% as the RBI failed to acknowledge the bulls on the street.Earlier in the day, Nifty opened with a gap up tracking gains among the Asian peers, but close to the crucial 5200 resistance, it printed an intraday high of 5190 and started to witness strong profit taking. The index fell by >100 points after the RBI announcement breaking below the 21- hourly EMA, but eventually went down to breach the 200 DMA support of 5072 and managed to close lower. A large ‘bearish engulfing candlestick / k ey reversal’ bar has formed on the daily chart suggesting further weakness with a reversal set above yesterday’s high of 5190. Volumes remained at an average level and the market breadth slipped strongly in favour of declines. Volatility crashed down to 22.66 from 25.54 on the Indian VIX index as the event has passed by. Near-term momentum has rolled bearish along with hourly momentum oscillators in sell mode suggest Nifty is vulnerable to further sell-off and is expected to retrace the two-week up move. A 50% retracement comes in at 4980 which also coincides with the 20 day SMA and is the most likely target on the downside. One should use rallies to 5100 to initiate trading shorts with a stop-loss above 5150.
All the sectoral indices ended the day in the red led by losses in Banking (-3.16%), Realty (-2.78%), and FMCG (-1.68%) indexes. Minor outperformance was seen in stocks from Auto (-0.64%) and Healthcare (-0.69%) sectors. The broader market Mid-cap and Small-cap indices managed to outperform the frontline index at -1.06% and -0.70% respectively.
Bullish Setups: TATA, HUVR, BJAUT, PWGR
Bearish Setups: ONGC, DLF, HCLT, SESA
Regards,
Edelweiss Research
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