Indian markets continued to weaken for the third consecutive session breaking below the multiple swing support at 5345, however managing to hold above the short-term 20-day MA support of 5320. While the intraday range for the Nifty was ~47 points, the broader markets are witnessing sharp selling activity as the market breadth deteriorated to an A/D ratio of 1:3. Volumes were on the higher side as we approach the derivatives settlement day. With all daily momentum oscillators rolling down, Nifty is likely to be under pressure in the immediate short-term and may well test the 5300 level. On the upside, any moves to 5360/5380 are likely to find stiff selling. We expect Nifty to drop down to the ‘bullish gap’ area of 5220-5260 (i.e. also the 50-day EMA) on sustained selling pressure below 5350 and recommend buying downside protection via put options.
Yesterday’s session witnessed strong selling high beta Metals (-2.44%), Cap Goods (-1.66%) and Banking (-0.97%) sectors; whereas defensive buying was seen in IT (+0.92%), FMCG (+0.70%) and Power (+0.57%) indexes. Weakness continues to persist in the broader market Mid-cap and Small-cap indices with losses of 1% and 1.4% respectively.
Bullish Setups: INFO, TCS, HUVR, ITC, RBXY, PLNG, DRRD
Bearish Setups: CNXBANK, HDIL, HNDL, ONGC, JPA, STLT
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