Technical charts hint at some support at 15,670, followed by the 15,400 level, but analysts do not rule out a revisit of sub-15,000 levels. Fundamentally, while analysts believe it is futile to predict a bottom at this stage, given global headwinds, levels around 15,000 on the index would look attractive, analysts said while advising investors to stay light for now.
“Maybe another 4-5 per cent, if the indices fall, we could start nibbling because we do not know where the exact bottom will be. What we need is to start buying when we think the downside potential is lesser than the upside potential. That could come more near 15,000 levels on Nifty50,” said Sandip Sabharwal,
asksandipsabharwal.com.
Sandeep Bhardwaj, CEO at , said there is a huge gap between the inflation rate that came in at 8.6 per cent in May and the 10-year US bond yields, which are at 3.187.
“In order to bridge this huge 5.4 per cent gap between the two, the Fed has to tame inflation by increasing interest rates. If the 10-year bond yields in the US increases to 5 per cent, we would see balance sheets getting starched for many companies. The yields on US 2-year Treasuries have passed 3 per cent and now are trading at the highest level since 2007, and its gap with the 10-year yields is now less than 5 bps, making a case for a sharp downturn in the equities,” Bhardwaj said.
Bhardwaj said almost all recessions in the US in the last 100 years have been preceded by a rising dollar, rising Interest rates and rising crude oil prices.
“Even this time, the scenario is the same. If we look at the technical chart, Nifty50 has given a breakout from a bearish flag pattern on the daily time frame and has come close to the important support of 15,670 levels. If the index breaks this level, it would lead to a continuation of the lower-high and lower-low pattern on the weekly timeframe, indicating a bearish bias for the medium term. We expect it to slide down, below 15,000 levels if the support is broken,” Bhardwaj said.
From a low of 15,684, the index recovered some lost ground and was trading at 15,740.95 on Monday afternoon, down 460.85 points or 2.84 per cent. The 15,000 level is still 4.8 per cent away from Monday’s intraday level of 15,754.55.
Abhishek Chinchalkar of FYERS said Nifty50 had fallen back to the 15,670-15,750 support zone.
“This is a critical support area for the index, as it has held firmly for the past three months. A break and sustainability below this zone would open the door for an extension of the decline towards 15,000 levels. On the upside, 16,000 now becomes the immediate resistance for the Nifty50,” he said.
Shrikant Chouhan of Kotak Securities said that a Nifty50 falling below 15,700 will be a major downside event for the market.
“In such a situation, the Nifty50 would fall to 15,500/15,400 in the short term. Also, it would remain under continued selling pressure due to the dismissal of long-term support levels,” he said.
Pritesh Mehta, Lead Analyst for institutional equities at YES Securities, said the presence of bearish anchor columns, high pole and negative follow-through since April 2022 has resulted in a sharp decline in Nifty50.
“A bearish turtle breakout on the P&F (point-and-figure) chart implies further weakness in the near term with a vertical target seen around 15,350. Our customized Top 10 Nifty index has reversed off the peak, trading below 200-DMA. We expect it to trade below May 2022 low, suggesting feebleness in the index biggies. Even inter-market set-up has been in a mess,” Mehta said.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)