Correction and volatility ahead

The Asian Age.  | Ashwin J Punnen

Business, Market

Analysts expect 11,250-11,200 to provide a decent support to the Nifty and the possibility of a bounce back cannot be ruled out at these levels.

The S&P BSE Sensex closed 3.9 per cent lower last week to end at 37,462, while the NSE Nifty 50 ended at 11,278.90, down 3.7 per cent.

Mumbai: The domestic market is likely to trade sidewise, as investors have turned cautious over the outcome of the ongoing general elections and the rising tensions in US-China trade relations.

The nervousness is quite palpable, as the market has seen a sharp correction over the past week. The S&P BSE Sensex closed 3.9 per cent lower last week to end at 37,462, while the NSE Nifty 50 ended at 11,278.90, down 3.7 per cent.

Analysts expect 11,250-11,200 to provide a decent support to the Nifty and the possibility of a bounce back cannot be ruled out at these levels. However, they are not ruling out volatility, going ahead.

Technical View

"We expect volatility to remain high during the week thus suggest focusing on risk management aspects and preferring hedged trades," Sanjeev Zarbade, Vice President of PCG Research at Kotak Securities said.

According to analysts, the Nifty, as per weekly timeframe, formed a long bear candle and closed near lows. This weekly candle pattern signals a formation of top reversal and this pattern indicates a reversal of prior uptrend.

"The short-term trend of the Nifty is weak. Any intra-week upside bounce from near the support of 11,250 is unlikely to hold for long. The next downside level to be watched is 11,000,” said Jayant Manglik, President - Retail Distribution, Religare Broking Ltd.

The broader market represented by the Nifty 500 Index closed 3.5 per cent down last week.

Experts said it is better to remain cautious ahead of the outcome of the national polls on May 23. Weak corporate earnings for the fourth quarter are also forcing investors to book profit.

As per provisional data, foreign portfolio investors sold shares worth Rs 1,245.14 crore on Friday, their biggest one-day sale in the domestic stock market in over two months.

Another big worry for investors is the election outcome. It is feared that the BJP may face a setback, as the 'satta market’ is now betting on 190-220 seats for the BJP. This figure was 280-300 seats in March post-Pulwama.

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