Dalal Street Corner: Correction in Sensex, Nifty50 continues for second straight session today; what should investors do on Wednesday?

Domestic markets closed negative for the second straight session mired by volatility. BSE Sensex closed around 400 points lower and Nifty50 settled above the 17500-mark, while broader markets underperformed the benchmarks on Tuesday. 

As many as 8 stocks advanced and 42 stocks declined on Nifty50 at the close. Among top laggards, Coal India was down by over 5 per cent at the market close while Tata Motors slipped over 3 per cent following weak JLR global wholesales.

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Nifty Bank outperformed the benchmark Nifty50 index with Axis Bank, Kotak Mahindra Bank, IndusInd Bank and ICICI Bank ending as top 5 gainers. Meanwhile, metal stocks slipped amid decline in global prices. Hindalco ended down 6 per cent, while IT stocks remained under pressure ahead of earnings. 

 "Hyperinflation and risk of a policy rate hike are placing the global market on its toes and are impacting the performance of equities with a rise in yield, said Vinod Nair, Head of Research at Geojit Financial Services in his post-market comment. 

“Inflation in India is also expected to be on the higher side in Q1FY23, it is expected to subside due to a reversal of commodity prices and improvement in supply. The domestic market is also cautious in anticipation of Q4 results,” he added. 

We have collated views from different experts as to what investors should do when trading resumes: 

Expert: Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas 

The Nifty broke down from an Inside bar pattern that was formed on the daily chart on April 11. The selling pressure, however, was absorbed near the 20 DMA, which induced the bulls into action. Consequently, the index managed to hold on to the level of 17500 on a closing basis.  

The overall structure suggests that with the recent minor degree dip, the index has reached the lower end of the short-term consolidation. 17500-17400 is a crucial support zone from where the index can take a leap towards 18000 on the upside. Thus, the risk-reward at this level is quite attractive to initiate a fresh long position from a short-term trading perspective. 

Expert: Kunal Shah - Senior Technical & Derivative Analyst at LKP Securities.  

The Bank Nifty Bulls came back strong in the second half and outperformed the Nifty Index. The index is near the resistance zone of 38000 and needs to take out this level decisively for the bulls to gain full control. The lower zone of 37400-37300 is acting as a demand area and a close below it will trigger fresh selling pressure. 

Expert: Rupak De, Senior Technical Analyst at LKP Securities.  

Nifty slipped lower as it broke the support of 17600. On the lower end, it found support around 17400 before closing about 90 points off the day's low. The bias, however, remains weak as the Nifty ended below the support of 17600, which is likely to act as resistance going forward. On the lower end, 17400 may continue to act as support below which the Nifty may witness a serious correction. 

Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities 

Nifty has broken trend support of 17600 – High probability of sideways to a corrective movement for the near term. A breach of 17420 can further infuse selling pressure in the short term. Immediate resistance is placed at 17600 – if crossed can invite some short covering. Bank-Nifty trades with a resistance of 37920. Weak longs can be exited since volatility is expected to rise in the near term. 

Expert: Ajit Mishra, VP - Research, Religare Broking Ltd. 

Weak global cues led to a gap-down opening which further deteriorated with a slide in IT, metals and realty stocks. Though the benchmark pared some losses in the middle, selling pressure at the higher levels capped the recovery.  

Markets will first react to macroeconomic data that is IIP and CPI data in early trades on Wednesday. Besides, weekly derivatives expiry and Infosys earnings will keep volatility high. We reiterate our cautious approach and suggest focusing on sectors/themes which are showing resilience.