Dalal Street Corner: Despite sharp recovery, indices end in red for 4th straight session; what should investors do on Thursday?

Despite a smart recovery in banking, financial and realty stocks in the last hour, benchmarks ended in the red for the fourth consecutive session on Wednesday. The market was largely dragged by selling pressure in the broader market, especially Nifty small cap index, which declined nearly 3% on Wednesday.  

Headline indices Nifty50 and the Sensex too settled with around half per cent cuts as the former slipped below 16, 200 and the latter shed more than 250 points. Nifty mid cap too witnessed a cut of around 0.4%. Among sectors, IT, auto, FMCG and Consumer Durable stocks were the top losers as they came under tremendous pressure on Wednesday.  

Besides weak global cues, the markets were also jittery because of CPI & IIP data, which are awaited this week, and relentless selling by Foreign Institutional Investors (FIIs).  

Indices displayed extreme volatility today ahead of the CPI & IIP data this week, said S Ranganathan, Head of Research at LKP securities 

"While we did see a sharp recovery in Indices during afternoon trade, the market breadth was very weak with several stocks in the broader market taking a big knock-on selling pressure as the Small-Cap Index lost 3% today," said LKP securities Head of Research. 

Meanwhile, benchmarks shed over 3% in the last four trading sessions and have failed to close in the green on a single day this week. As volatility has become a new normal for the markets in recent times, here is what experts say about today's fall and suggest what investors should do going forward.  

Vinod Nair, Head of Research at Geojit Financial Services. 

Investors continue to remain wary despite global markets trading in green due to a drop in domestic investors confidence & FIIs selling. The market turned volatile waiting for the release of April US inflation data, which is expected to cool down marginally.  

Inflation will continue to be elevated but the chance of major reactions is low because it has been factored in by the markets. The major determinant for market direction would be the pace of decline in inflation in response to the Fed measures. 

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities. 

The Bank Nifty index witnessed a smart recovery from the lower levels. The index, however, needs to close above the level of 35000 to resume the move towards the level of 36000.  

The downside support stands at the 34200-34000 zone and a break below this will only lead to a fresh round of selling. The momentum oscillators are already in oversold territory and a minor pullback cannot be ruled out. 

Rupak De, Senior Technical Analyst at LKP Securities 
Nifty recovered smartly from the day's low before closing with a marginal loss. On the lower end, it found support at 16000 as it closed at 175 points off the day's low. On the daily chart, a large lower wick indicates buying at the lower level. On the higher end, the Nifty is likely to move towards 16400. On the lower end, support is seen at 16100/15950. 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

Sustained buying by DIIs and retail investors is imparting resilience to the market even when FPIs continue to be in the sell mode.  

An unhealthy trend in the market is retail investors chasing low-grade cheap stocks. The only sensible strategy in this highly volatile environment is to buy small quantities of high quality stocks for the long-term and refrain from speculation. 

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)