Market Outlook: Tug of war between bulls and bears! What should investors do?
On Friday, equity benchmark Sensex pared all intraday gains and closed 136.69 points or 0.26 per cent lower at 52,793.62.
- May 16, 2022,
- Updated May 16, 2022 7:26 AM IST
Of late, the investors on Dalal Street have been on a roller-coaster ride amid weak global cues, inflation worries and unabated selling by foreign institutional investors.
On Friday, equity benchmark Sensex pared all intraday gains and closed 136.69 points or 0.26 per cent lower at 52,793.62. During the day, the 30-stock index rallied 855.4 points or 1.61 per cent to 53,785.71. Nifty also dipped 25.85 points or 0.16 per cent to end at 15,782.15.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "This is the season of headwinds for markets. High inflation in the US and the hawkish Fed has pushed up bond yields, negatively impacting equity markets. FPIs continue their selling spree further impacting sentiments. To top it all, CPI inflation for April has come at a disturbingly high level of 7.79 per cent, leaving no option for RBI but to turn hawkish in the coming policy meets."
Vijayakumar added that the positive side is that all this bad news is already known and factored-in by the market.
"Nifty 50 ended the week sharply negative and is now trading around a strong support level of 15,700 which coincides with the bottom end of the downward sloping channel," Yesha Shah, Head of Equity Research, Samco Securities told Business Today.
"BankNifty is also trading near the rising trend line support formed from the lows of March 2020. Both the Indian and major global indices are now at oversold levels. So, an immediate rebound in the Nifty and BankNifty is highly possible. Basis how Nifty opens next week, highly aggressive traders may initiate long trades with a strict stop loss right below 15,700. The immediate resistance is now set at 16,600 levels," Shah added.
Next week, Shah said that India’s WPI data will be released and the much-anticipated IPO, LIC, will be listed on the exchanges. Apart from these, no other major events are expected. In absence of any positive catalysts, indices are expected to remain under pressure as selling is emerging on every bounce. Investors are therefore urged to remain on the sidelines since it is preferable to wait out the storm than to go bottom fishing during such turbulent phases.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One Ltd noted that the global macro factors have weighed down heavily on financial markets across the globe and we are certainly not spared from it. The oversold market is in a denial mode to give a small recovery, in fact, Friday’s rebound got completely sold into towards the fag end. This certainly does not augur well for the bulls.
He added that the recent low of 15671 is not far from current levels now and the moment we slide below it, it will create a panic kind of situation in the market. Below this, 15350 - 15200 are the next levels to watch out for. On the flipside, 16000 - 16200 has now become a stiff hurdle. The first sign of relief is possible only above these levels. Till this time, one should avoid trading aggressively in the market.
"Although, the trend is strongly bearish at this moment, we advise investors with a slightly broader time frame, should start nibbling on quality propositions in a staggered manner. Also, since the global factors are driving the markets completely, traders should keep a close tab on all these developments," he said.
Sharing the technical view, Palak Kothari, Research Associate, Choice Broking said that the Nifty has formed a bearish candle on the weekly chart which indicates downside movement for the upcoming session. Moreover, Nifty has faced resistance from rising trendline and showed selling pressure which is a sign of selling of higher levels.
In addition, Kothari said that Nifty has been sustained below the neck line of the Head & Shoulder pattern which indicates southward direction for the upcoming session. However, the momentum indicators MACD & Stochastic were trading with a negative crossover and entered the oversold zone. However, till now, there is no reversal sign.
"The Nifty may find strong support around 15,700 levels, while on the upside 16,100 may act as an immediate hurdle for the Nifty crossing above the same can attract fresh buying. On the other hand, Bank nifty has support at 32,600 levels while resistance at 34,000 levels," she added.
According to Mohit Nigam, Head - PMS, Hem Securities, the immediate support and resistance for Nifty are 15,600 and 16,000 respectively. Immediate support and resistance for Bank Nifty are 33,000 and 34,000 respectively.
Also read: Musk effect on Wall St? Twitter sinks over 10%, Tesla jumps more than 5%
Also read: 8 of top-10 firms lose Rs 2.48 lakh cr in m-cap; Reliance biggest drag
Of late, the investors on Dalal Street have been on a roller-coaster ride amid weak global cues, inflation worries and unabated selling by foreign institutional investors.
On Friday, equity benchmark Sensex pared all intraday gains and closed 136.69 points or 0.26 per cent lower at 52,793.62. During the day, the 30-stock index rallied 855.4 points or 1.61 per cent to 53,785.71. Nifty also dipped 25.85 points or 0.16 per cent to end at 15,782.15.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "This is the season of headwinds for markets. High inflation in the US and the hawkish Fed has pushed up bond yields, negatively impacting equity markets. FPIs continue their selling spree further impacting sentiments. To top it all, CPI inflation for April has come at a disturbingly high level of 7.79 per cent, leaving no option for RBI but to turn hawkish in the coming policy meets."
Vijayakumar added that the positive side is that all this bad news is already known and factored-in by the market.
"Nifty 50 ended the week sharply negative and is now trading around a strong support level of 15,700 which coincides with the bottom end of the downward sloping channel," Yesha Shah, Head of Equity Research, Samco Securities told Business Today.
"BankNifty is also trading near the rising trend line support formed from the lows of March 2020. Both the Indian and major global indices are now at oversold levels. So, an immediate rebound in the Nifty and BankNifty is highly possible. Basis how Nifty opens next week, highly aggressive traders may initiate long trades with a strict stop loss right below 15,700. The immediate resistance is now set at 16,600 levels," Shah added.
Next week, Shah said that India’s WPI data will be released and the much-anticipated IPO, LIC, will be listed on the exchanges. Apart from these, no other major events are expected. In absence of any positive catalysts, indices are expected to remain under pressure as selling is emerging on every bounce. Investors are therefore urged to remain on the sidelines since it is preferable to wait out the storm than to go bottom fishing during such turbulent phases.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One Ltd noted that the global macro factors have weighed down heavily on financial markets across the globe and we are certainly not spared from it. The oversold market is in a denial mode to give a small recovery, in fact, Friday’s rebound got completely sold into towards the fag end. This certainly does not augur well for the bulls.
He added that the recent low of 15671 is not far from current levels now and the moment we slide below it, it will create a panic kind of situation in the market. Below this, 15350 - 15200 are the next levels to watch out for. On the flipside, 16000 - 16200 has now become a stiff hurdle. The first sign of relief is possible only above these levels. Till this time, one should avoid trading aggressively in the market.
"Although, the trend is strongly bearish at this moment, we advise investors with a slightly broader time frame, should start nibbling on quality propositions in a staggered manner. Also, since the global factors are driving the markets completely, traders should keep a close tab on all these developments," he said.
Sharing the technical view, Palak Kothari, Research Associate, Choice Broking said that the Nifty has formed a bearish candle on the weekly chart which indicates downside movement for the upcoming session. Moreover, Nifty has faced resistance from rising trendline and showed selling pressure which is a sign of selling of higher levels.
In addition, Kothari said that Nifty has been sustained below the neck line of the Head & Shoulder pattern which indicates southward direction for the upcoming session. However, the momentum indicators MACD & Stochastic were trading with a negative crossover and entered the oversold zone. However, till now, there is no reversal sign.
"The Nifty may find strong support around 15,700 levels, while on the upside 16,100 may act as an immediate hurdle for the Nifty crossing above the same can attract fresh buying. On the other hand, Bank nifty has support at 32,600 levels while resistance at 34,000 levels," she added.
According to Mohit Nigam, Head - PMS, Hem Securities, the immediate support and resistance for Nifty are 15,600 and 16,000 respectively. Immediate support and resistance for Bank Nifty are 33,000 and 34,000 respectively.
Also read: Musk effect on Wall St? Twitter sinks over 10%, Tesla jumps more than 5%
Also read: 8 of top-10 firms lose Rs 2.48 lakh cr in m-cap; Reliance biggest drag