Dalal Street Corner: Markets close negative, but above support level; what should investors do on Thursday?

The stock markets witnessed volatility and erased opening gains to close near day’s low on Wednesday. The BSE Sensex fell by 305 points or 0.5 per cent to 57,685 while the Nifty50 declined by 70 points or 0.4 per cent to settle at 17,246. 

The broader markets outperformed benchmarks today with Nifty Midcap 100 gaining almost 0.6 per cent from the last closing on Tuesday.  

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Metals and pharma stocks outperformed today. Hindalco Industries, Tata Steel, Divis Lab and Dr Reddy’s were among the top gainers, while financials dragged the Nifty index, HDFC and Kotak Bank were among top losers. As many as 21 stocks advanced and 29 declined on Nifty50. 

On the back of rising input costs, auto companies’ stocks too saw a decline, Maruti, Mahindra and Mahindra were among the top losers in the sector. L&T Finance posts biggest single-day gain in 10 years as promoter bought company’ shares. 

In mid-cap category, City Union Bank, Tata Communication, AU Small Finance Bank, Jindal Steel and Power were among the top gainers and Chambal Fert, Info Edge, JK Cement, GNFC and Atul were the top losers in the segment. 

“The volatility in the market is back due to inflationary pressures triggered by supply constraints. While consistently rising input cost, fall in demand due to surge in covid cases in parts of the world, war & high commodity prices are impacting earnings growth which can lead to downgrade in outlook,” Vinod Nair, Head of Research at Geojit Financial Services said in a comment.  

“Today being the 2nd anniversary of the Covid lows, Nifty has traversed a long way by posting a whopping 127 per cent return since then. The Indian investor has shown the courage in transforming the investing landscape by believing in equities as an asset-class even as FPI's pulled out big time,” market analyst S Ranganathan, Head of Research at LKP securities said in a note. 

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

Mohit Nigam, Head - PMS, Hem Securities 

Domestic markets were facing high volatility due to inflationary pressure triggered by supply constraints, rising crude oil prices leading to increase of input cost, high commodity prices. 

On the technical front immediate support and resistance level for Nifty 50 are 17000 and 17400 respectively. For Banknifty 35800 and 36600 are immediate support and resistance respectively. 

Expert: Palak Kothari Research Associate Choice Broking 

Technically, Nifty50 has taken resistance from the horizontal line and formed a bearish candle on a daily chart which suggests weakness for next trading day. Momentum indicator STOCHASTIC in trading with negative crossover on daily charts which indicates downside movement can be seen.  

Moreover, Nifty managed to close above 50-DMA sustained above the same can show northward direction. Further any positive trigger from the geopolitical tensions can ease the selling pressure.  

Expert: Vijay Dhanotiya, Lead of Technical Research at CapitalVia Global Research Limited 

The market witnessed profit booking after it failed to resist above the level of 17400. As of now, the short-term technical condition of the market shows that the expected range of the market is likely to be between 17000 and 17400.  

While it is subject to further price action evolution, our research suggests it is prudent to wait for a decisive breakout above 17400 and technical factors to improve before going long in the market.  

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

The move in the index so far shows consolidation after two weeks of rebound and it’s healthy. However, the prevailing uncertainty on the global front combined with the lack of any domestic trigger is keeping the participants on their toes. In such a scenario, we feel it’s prudent to stick with the sectors or themes which are doing well but avoid going overboard.