With the Nifty on Tuesday managing to close above 17,000 for the second day after declining below it earlier in the session, market participants are betting that the market may not fall further in the near term unless the index closes below this level.
The 200-day moving average (DMA) – a long-term technical trend indicator – of the Nifty is at 16,990. When a stock or an index closes below 200 DMA, it’s considered bearish and vice versa. The Nifty closed at 17,007.40 on Tuesday after touching a low of 16,942.35 – the level it previously tested on July 28. The index had risen as much as 1% earlier in the day before giving up its gains.
“Bulls have managed to protect the 200 DMA on a closing basis,” said Rupak De, senior technical analyst at . “The momentum indicator is in a bearish crossover. The trend remains weak.”
If the Nifty falls below 16,930-16,880, it could fall by 1.5-3.6% to 16,750 and then to 16,400, said Sudeep Shah, head of technical and derivatives research at
Securities. “Strong put writing is currently seen in the 17,000 strike indicating support at 16,930-16,910 zone,” said Shah. “Till 16,930-16,880 holds we could see a pullback towards 17,250-17,300 levels.”
The Nifty and Sensex have lost nearly 4.5% in the previous five sessions led by foreign portfolio selling to the extent of ₹12,582 crore. On Tuesday, they were sellers worth ₹2,823.96 crore, according to provisional data.
Analysts said a stronger dollar and concerns over the impact of a recession in the West have triggered risk-off sentiment.
“Markets are at the crossroads,” said Gautam Singh, senior economist and strategist at Spark Capital in a client note. “We see India’s ability to absorb further external shocks beginning to weaken. (India) being a net importer, a fall in commodity prices can potentially offset the negative impact on exports and capital account outflows. However, the sequencing of events may mean pain before the gain.”
Aggressive rate hikes by the US Federal Reserve — and other major central banks across the world to control a steep rise in commodity prices — have resulted in capital flight to safe-haven assets like the dollar.
“Markets will remain volatile and trade in a tight range in the near-term. Foreign fund flows in the cash segment will set the tone for the Indian markets,” said Abhilash Pagaria, head of alternative and quantitative research at Edelweiss Financial Services.
