Sensex, Nifty down 4% from highs! What should be your trading strategy on Diwali Muhurat Trading Day?

Bears took control of D-Street in the run up to Muhurat Trading on Thursday pushing the S&P BSE Sensex below 60,000 while the Nifty50 also closed below 17900 levels on Wednesday.

Both Sensex, and Nifty50 are down over 4 per cent from the recent record highs of 62,245, and 18,604, respectively in the run up to Diwali Muhurat Trading Day. Both benchmark indices touched their record highs on October 19.

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Leading stock exchanges BSE and NSE will conduct a special muhurat trading session on the occasion of Diwali on November 4. The Muhurat Trading (Opening bell ringing ceremony) will start at 6.15 pm. The trading will continue for one hour till 7:15 pm.

Also Read: Muhurat Trading Time 2021: Know full BSE, NSE schedule, how to watch Lakshmi Poojan LIVE and more

The biggest overhang for Indian markets in the run up to Diwali was the outcome of the US Federal Reserve policy meeting and mixed bag September quarter results from India Inc.

The decision to delay the rate hike for now should support Indian markets, but profit booking at higher levels cannot be ruled out. For bulls to take control, a close above 18,000-18,300 on the Nifty50 is required, suggest experts.  

The US Federal Reserve said that it would be "patient" in deciding when to raise its benchmark overnight interest rate from the near-zero level, said a Reuters report.

The Nifty futures on the Singapore Exchange were trading with a positive bias with gains of over 60 points at 08:30 AM IST.

The Fed, as widely expected, announced on Wednesday that it would begin reducing its $120 billion in monthly purchases of Treasuries and mortgage-backed securities at a pace of $15 billion per month, with a plan to end the purchases altogether in mid-2022, added the report.

“Tapering of Fed’s $120 billion bond-buying program in the near term is widely expected. Any signs of faster pace of tapering may be negative for equity markets and investors should trade with caution in that scenario,” Mohit Nigam, Head - PMS, Hem Securities Ltd, said.

But the US Fed remains patient which puts speculation about raising rates to rest, for now. "We don't think it is time yet to raise interest rates. There is still ground to cover to reach maximum employment," Reuters said in a report quoting Fed Chair Jerome Powell, adding that he thought that goal could perhaps be met late next year.

The Nifty50 closed 0.3 per cent lower at 17829 while the S&P BSE Sensex ended 257 points lower at 59,771 on Wednesday. Sectorally, buying was seen in capital goods, realty, metals, power, and infra stocks while selling pressure was seen in telecom, bankex, auto, and consumer durables.

What Should Investors Do?

The market remained volatile largely on account of US Federal Reserve policy meeting. Foreign institutional investors (FIIs), who pulled out more than Rs 25,000 cr in the cash segment from Indian equity markets, continued to remain net sellers in November.

They remain net sellers for over Rs 350 cr so far in November, in the runup to Diwali Muhurat Trading in the cash segment of Indian equity markets.

“From a trading perspective, FII have been sellers from quite some time and the selling figures have been too large. One needs to be cautious as the selling hasn't converted into a big buying figure,” Ashish Chaturmohta, Director Research, Sanctum Wealth, said.

Despite the recent selloff, technical experts suggest investors to buy the dip and add quality stocks to their portfolio.

“The bullish movement is intact as the index is taking support from the horizontal line as well as suggesting buying from the dips. On the technical front, the index has been trading with the support of 50 DMA, sustained above the same can suggest an upside rally,” Palak Kothari, Research Associate at Choice Broking, said.

“The momentum can be seen on stock-specific as some of the stocks are given a breakdown. One can initiate a short position on them while the time index is taking support from 17600 levels. Can add on dips,” added Kothari.

In terms of levels, Kothari is of the view that for the Nifty index, the immediate support comes at 17600 levels while resistance comes at 18020-1850 levels crossing above the same can show 18300 &18600 levels.

We have collated a list of recommendations on important support & resistance level for Nifty & Nifty Bank for the Diwali Muhurat Trading session:

Expert: Vijay Singhania, Chairman, TradeSmart

Both the key indices are critically poised. For Nifty, we expect support at around 17,500 levels and immediate resistance at 18,052 and 18,350 levels, followed by the previous top of 18,604.

For Bank Nifty 38,400 will act as the first support level followed by 37,700 and resistance are at 40,000 and the previous top of around 41,800.

Expert: Ashish Chaturmohta, Director Research, Sanctum Wealth

All trades must be executed with strict stop loss and trades should be made in more of nifty stocks where liquidity would enable quick entry and exit.  

The bounce back in Nifty is facing resistance around 18,000 odd levels. Thus, crossing above 18,000 Nifty can move towards 18,350 levels.

On the downside, a recent low of around 17600 will be a support level. Breaking below this further decline towards 17,325 levels can be seen.

Bank Nifty too unable to sustain above 40,100, hence crossing above it, the rally can be seen towards 41,300 levels. On the downside, support is seen at 38,800 and 38,400 levels.

Expert: Rahul Sharma, Co-Founder, Equity99

For Thursday, 17,765 will act as crucial support for Nifty on breaking which we might see 17,725 levels and if these levels are broken then 17,650 is also possible.

On the upper side, 17,880 will act as crucial resistance and if it is broken then 17,960 is possible if this level is broken then weight regain 18k levels and the next resistance will be 18,100 levels.

For Bank Nifty 39,330 will act as important support on breaking which we will see 39,100 levels and if this level is broken then 38,850 is also possible.

While on the upper side 39,670 will act as crucial resistance if these levels are broken then 39,900 is possible to post which 40,200 levels will be the next resistance levels.

(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.)