Downward corrective leg is likely to continue

For the eighth consecutive session equity markets faced selling pressure on twin head winds of general election outcome and trade war between US and China. After a volatile session Sensex closed at 37,462.99 down by 95.92 points or 0.26 per cent while the Nifty-50 closed at 11,278.90, down by 22.90 points or 0.20 per cent.

However, there was some recovery in the broader market with the BSE Mid-Cap up 0.24 per cent and Small-Cap up 0.21 per cent. The sectoral indices on BSE closed mixed, the gainers included bankex (0.43 per cent), consumer durables (1.51 per cent), telecom (0.83 per cent) while the losers included IT (-1.13 per cent), metal (-1.54 per cent), oil & gas (-0.98 per cent) and FMCG (-0.48 per cent).

Among the Sensex constituents only nine out of thirty stocks closed with gains.

Technical View

Nagaraj Shetti, Senior Technical & Derivative Analyst, HDFC Securities said, "After showing a sharp weakness from the highs in the last session, the bloodbath continued in the market, as the Nifty showed another session of steep weakness in Friday's session, which indicates a sharp downward reversal in the market."

"This downward corrective leg is likely to continue in the Nifty for the next session and could reach the next support levels of 11,280 in the next couple of sessions."

"In the coming week, 11,200 might act as an intermediate support for the index since even the intraday charts looks exhausted. If the support is held then we expect a short covering move in the index. In such scenario, 11,350-11,550 might act as strong resistance for the index in the coming week. Overall, we expect the markets to turn more volatile in the coming weeks due to election results," Technical Analyst from India Nivesh said.

Market View

Vinod Nair, Head of Research at Geojit Financial Services said, "The fourth quarter results so far was marginally below the expectations which will lead to further downgrade in earnings & valuations."

"Slowdown in mutual fund inflows is also indicating that investors has turned cautious. Any sharp outflow of foreign funds may impact the liquidity and domestic market may under perform in the near term."