Dalal Street Corner: Market snaps 2-day winning streak, closes down 1.4%; what should investors do on Thursday?

The Indian markets snapped two-day gaining streak to end negative on Wednesday, as Auto, Banking and Financial Services stock saw maximum crack. The benchmark indices – Sensex and Nifty50 – each declined up to 1.4 per cent at the market closing time on Wednesday. 

Sensex closed 778 points lower at 55,469 and Nifty50 188 points lower at 16,606 on Wednesday, similarly, Nifty Bank slipped 833 points to 35,373 and Midcap closed flat 6 points to 28,217-mark. 

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State-owned oil exploration and production companies such as Oil India, ONGC & HOEC post healthy gains as crude oil zoomed to all-time high since 2014 on Wednesday. Similarly, Insurance companies shares also spurted up to 6 per cent as government mulling to defer LIC IPO, as per media reports. 

Auto index closed almost 3 per cent lower as the auto companies slipped during Wednesday’s trade post announcement of February auto sales. Maruti and Bajaj Auto were the biggest laggards. 

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

Expert: Vinod Nair, Head of Research at Geojit Financial Services. 

"The strengthening of war drowned the global market, alarming the Indian market to start with substantial weakness. The negative effect was more on large-caps in-line with weak Q3 GDP data and downgrade of FY22 growth to 8.9 per cent from 9.2 per cent, by NSO.  

Mid and Small caps outperformed, in the context of the recent carnage of the broad market, making it a better pick. It makes sense to deploy the surplus cash in your portfolio in a step-by-step manner assuming stability in the future on a medium to long-term basis. 

The weakness subsided by the end of the day. However, volatility is expected in the near term given boiled crude price, state election outcome, and Fed policy status in the coming weeks" 

Expert: S. Hariharan, Head of Sales, Emkay Global Financial Services 

The market is currently caught between many macro cross-winds – higher inflationary pressure exerted by sharp rises in commodities prices across the board (crude oil, gas, metals, agri commodities), determination on the part of DM central banks to withdraw monetary accommodation and slowing growth impulses.  

As a result, earnings estimates are undergoing downward revisions for the first time in 5 quarters, while index valuation at 19x FY23e EPS is still higher than longer-term averages. FII flow environment has turned decisively negative in CY22, with net sell flow of $9 bn so far, and while DIIs have been absorbing sell flow with a similar quantum of deployment, historically, it has been seen that weak price action is followed by outflows from DIIs as well.

As a result, the flow picture looks quite adverse despite recent 10 per cent correction in Nifty. Financial Services appear weakest on account of consensus over-weight positions, while Materials names have attracted incremental inflows due to under-ownership among institutions.” 

Expert: Palak Kothari Research Associate Choice Broking. 

Technically, Index has formed a Doji kind of candle on a daily time frame which suggests confusion between buyers & sellers. On an hourly chart, the Index has formed an Open Bullish Marubozu candle which suggests upside movement can be seen.  

Moreover, the Index has faced resistance from the falling trendline as well as 21-HMA crossing above the same can show upside movement. The index has tested the physiological level of 16500 levels and showed bounce from there crossing above 16700 can show further upside.  

The Nifty may find support around 16450/16300 levels while on the upside 16800 may act as an immediate hurdle for the index. On the other hand, Bank nifty has support at 34800 levels while resistance at 36400 levels.