Is a deeper market correction on cards? Here is what analysts say

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Indian stock markets closed sharply lower today, tracking a selloff in other global markets after an overnight plunge in technology stocks on Wall Street. The blue-chip NSE Nifty 50 index closed down 1.68% at 11,333.85, while the S&P BSE Sensex was down 1.63% or 633 points at 38,357.18.

For the week, the Nifty fell 2.69% and the Sensex slid 2.81%. The Nifty bank index closed 2.21% lower after Supreme Court on Thursday directed banks not to declare any loans that were standard as of end-August as non-performing until further orders. ICICI Bank Ltd fell 2.7% and HDFC Bank Ltd slipped 1.1%.

India’s most valuable company, Reliance Industries Ltd fell 1.7%. Automaker Maruti Suzuki India Ltd was the gainer among Nifty,50 stocks, closing up 1.7%.

Here is what analysts said on today’s market performance:

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities

“Technically, the index has formed Bar Reversal kind of formation which clearly indicates high chances of further correction from current levels. The texture of the market is weak and weakness likely to continue in the short run. For the next few trading sessions 11420 should be the sacrosanct level for the traders, trading below the same we can expect further price correction up to 11250. On the flip side, trading above 11420 may trigger quick pullback rally till 11500-11550.”

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Nagaraj Shetti, Technical Research Analyst, HDFC Securities

“The crucial multiple lower supports of around 11350-11380 (previous swing low, minor uptrend line and 20 day EMA) has been broken today and Nifty closed just below that area towards the end. Hence, a decisive decline below this area could open more weakness in the near term.

Nifty, on the weekly timeframe chart formed a reversal pattern like bearish engulfing. This is important pattern on the weekly chart, which has not formed in the last few months. The recent upside breakout attempt of significant intermediate uptrend line (intermediate trend line as per change in polarity-weekly/monthly chart) has turned out to be a false downside breakout. this is negative indication.

The short term trend of Nifty has turned down after a minor upside bounce. Any upside bounce attempt from the lower support of 11300-11325 could be a sell on rise opportunity in the near term. A decline below the support could open a broader weakness in the market towards 10800 levels for the next few weeks.”

Manish Hathiramani, Index Trader and Technical Analyst, Deen Dayal Investments

“We managed to stick above the 11300 level which is a saving grace for the bulls until markets reopen on Monday. If we breach this level on a closing basis, we could enter into a short term bear phase. On the upside, we need to get past 11600 for the markets to continue its upward momentum.”

Nirali Shah, Senior Research Analyst, Samco Securities.

“It would be advisable for traders to lighten their long positions in the market and maintain a negative outlook with a sell on rally strategy. Once the immediate support of 11100 is broken on the downside, Nifty50 might head to test the lower end of the channel which is placed at 10700 levels. Immediate resistance is now placed at 11600.”

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