HDFC Securities says decisive move below 14200 is expected to drag Nifty down to 13700-13600 levels by this month

HDFC Securities has said that Indian benchmark equity indices fell sharply by over 3.5 percent on April 12 – the most in a month - as due to rapidly rising covid cases the government of Maharashtra (the richest state) will take a lockdown decision post the state Cabinet meeting on April 14. The Nifty opened gap down and kept falling through the day. At close, the Nifty was down 524 points or 3.5% at 14311.
 
HDFC Securities highlights that Volumes on the NSE were above recent averages. Among sectors, PSU Bank, Media, Realty, Metal, Auto, Banks fell the most. The Nifty Midcap index fell 5.7%, the most in over a year while the Smallcap index too fell 5.6%. The India Volatility Index rose the most in over a month, ending 16.2% higher at 22.99.
 

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Asian shares were lower on Monday, as investors grew wary over the recent surge in coronavirus cases in many places even as vaccination efforts are making little headway. European markets retreated slightly on Monday as global stocks continued to search for direction after record highs in several regions last week and reacted to negative coronavirus developments. China’s top disease control official said during the weekend that the effectiveness of Chinese coronavirus vaccines was low and the government is considering mixing them to get a boost.
 
India’s Benchmark indices slumped to a 10-week low as daily COVID-19 infections spiked.  Investors remained worried about the economic fallout of the fresh surge in coronavirus cases and the subsequent restrictions announced by several state governments. These developments could jeopardise the market's assumption of around 11 percent GDP growth and above 30 percent Nifty earnings growth. Advance decline ratio plunged to the lowest since Feb 28 suggesting the amount of panic in the broader markets.
 
HDFC Securities says that Nifty turned up today from 14249, making a near double bottom with 14264 made on March 25, 2021. A breach of this level could lead to more weakness in the near term. 14460-14574 could be the resistance for the Nifty in the near term. While sentimentally there is little to expect in terms of bounces, some positive news on the Covid or its vaccination front could provide a respite, however temporary. 
 
HDFC Securities explains that after showing minor weakness from the hurdle of 14900 on Friday, Nifty witnessed a bloodbath on Monday and closed the day sharply lower by 524 points. After opening on a downside gap of 190 points, Nifty slipped into further weakness in the early to mid part of the session. An attempt of upside recovery in between was met with selling for the day. Nifty finally closed the day with a minor upside recovery note.
 
Conclusion: The sharp decline of Monday seems to have reversed the short term positive sentiment within a broader range. From the upper range near 15200, the market has reached down to the lower range of 14300-14200 levels. Hence, there is a higher possibility of sharp move on either side. If sustainable buying emerges from here, the Nifty could show an upside bounce up to 14800-14900 in the coming weeks. A decisive move below 14200 is expected to drag Nifty down to 13700-13600 levels by this month.