After six days of decline that took away more than five percent of value from the Nifty50, the index is still facing resistance near the 16,000 zone. How should investors approach the current market?
Indian equity benchmarks have lost more than five percent of their value in a broad sell-off that stretched to six back-to-back sessions, with the Street punishing every attempt of a pullback. Although the Nifty managed to eke out a gain of 0.4 percent to halt the losing streak on Monday, the 50-strong may not be out of the woods.
How should you approach this market?
"Even the strongest of downtrends have steep bear market rallies, but the appetite for risk does not look to be robust enough to chase prices higher," Anand James, Head Market strategist at Geojit Financial Markets, told CNBCTV18.com.
"Traders continue to weigh incoming data to gauge how hard both the RBI and the Fed will press on the interest rate pedal now that both have started to tighten monetary policies," he said.
Key levels to track
Prakash Gaba of prakashgaba.com told CNBC-TV18 that the 15,950-16,000 band has strong resistance and is an important level to watch out for, a beakout of which will be good for the market in his view.
"Then we can see even 16,100-16,200 levels. So far, the market looks okay because I don't see weakness, but some profit looking or short covering can happen... On the Bank Nifty, looks like 33,500 should be possible and we will see 34,000 possibly in a day or two," he said.
He expects an upmove in the banking index that could help the 50-scrip benchmark.
Others are of the view that one should avoid long positions till the index takes out the 16,050 level. Mitessh Thakkar of earningwaves.com told CNBC-TV18 that in his view, the market is in a counter trend rally. He sees 16,050 as a pivotal level for the index.
On the Nifty Bank, he sees such a point in the 34,200-34,300 zone. "Around that, it will attempt to short, and if that is cleared, get out of short mode and try to take some long exposure," he said.
16,000 a tough hurdle
On Monday, a pullback in the Nifty50 met strong resistance close to 16,000.At current levels, the index is more than 1,400 points below its long-term simple moving average (DMA). Just like the headline index, the banking gauge is also well below all of its six main DMAs.
|Period (No. of sessions)||Nifty DMA||Nifty Bank DMA||Signal|
Does a sell-on-rise approach make sense now?
Rahul Sharma, Co-Founder of Equity99 Advisory, told CNBCTV18.com that the market is in a major 'sell-on-rise' trend with a strong hurdle at 16,000-16,100. "Unless we get a closing above 16,100, every pullback will be used for a sell-on-rise strategy," said Sharma, who does not see clear signs of a meaningful pullback anytime soon.
The Nifty has to take out 16,100 on a closing basis in order to stage a rally to higher levels, he said.
Manish Gunwani, CIO-Equity Investments at Nippon India Mutual Fund, is banking on the domestic economic cycle.
The domestic cycle looks better to him than the global one, he told CNBC-TV18.
"Clearly, the outlook for global growth being very strong from here cannot be a high probability call, whereas on the domestic side, whether you see from our two-year or 5-7-year perspective, whether it's capex, exports or domestic consumption, India has gone through a fairly tepid cycle,” he added.
Gunwani expects more of rupee depreciation to aid the domestic equity market. The rupee has depreciated against the dollar but outperformed major currencies such as the yen, the yuan and the won over the last 1-3 months," he said.
First Published: IST