15,000 on Nifty50 is likely to act as first psychological support in coming week: Viraj Vyas

A volatile week for Indian markets where Sensex and Nifty50 both hit fresh 52-week low, respectively. What led to the price action?

The index has been in a time price correction since October 2021 where we saw bouts of strengths and weakness. In that, the index started to form a classical lower highs and lower bottoms.

Earlier in the week gone by, post opening the gap down, the index saw a continued weakness as it broke from the downward sloping channel.

Besides the price action what intensified the fall was led by factors such as –

a) Higher US inflation and at home,

b) Fed rate hike and future hike prospects,

c) Supply chain issues due to Russia-Ukraine war and China COVID-led lockdowns, and

d) Strengthening dollar

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We hit a 52-week low last week – what is next for Indian markets? Should one turn cautions, reduce long positions or buy the dip? What does history suggest?

Well, the time for caution has already passed us when the index failed to move past 16,800 earlier this month. The price intensity seen on Thursday suggests that the Index is likely to test 14,500 on the downside.

However, for investors, this is a good time to accumulate quality businesses, with strong moats and excellent management.

Indian markets have been on a historic bull run since the start of the new millennium and given how the Indian economy is shaping up coupled with political stability, Indian markets will once shine when the dust settles.

Which are the important levels that one should watch out for in the coming week for Nifty and Nifty Bank?
The coming week is very important since the index will try to attempt a relief rally. FIIs have been sitting on record short positions in the Index and they would be looking to book some profits which might take the form of a short-covering move.

However, such bounces if any, would be sold into and should not be utilized to create fresh longs.

From a near-term perspective, the 15,000 psychological levels will be the first test of support while the 15,900-16,000 zone on the upside coupled with the bearish gap will act as resistance.

With regards to Bank Nifty, the 32,000 level is a critical level since it was the pre-COVID high, and failing to sustain above the same might trigger a deeper selloff while resistance on the upside is seen at the 33,700-34,000 zone.

Metal and IT sector fell by 8-9% in a week. What led to the price action? Will the weakness continue in the coming week as well?
Metals started a strong bull-run towards the end of 2020 and the run-up was almost vertical in nature as the index move up almost 200% in 17 months.

Given the nature of this move, a correction was warranted, and the geopolitical crisis just intensified the fall.

So far, the Metal Index has retraced 38.2% of the rise but given the intense down move was seen in the last 2 months means the Index might head towards 50% retracement level (4150-level).

Nifty IT on the other hand was the darling of the bulls in the move that panned out from the March 2020 lows. This space was in its Euphoria phase towards the end of December 2021, and it has already retraced 38.2% of the entire rise.

Again, given the nature of how crowded the trade was in Nifty IT and the kind of re-rating this sector witnessed, it seems the bulk of the down move in this sector seems over.

Having said that, there is still a possibility that the Index might test the 50% retracement level before it begins to consolidate and form a base.

What is your take on small & midcaps? Will they see further selling pressure compared to largecaps?
Small-caps and Mid-caps always tend to bear the brunt of a bigger market correction since recession and slowdown fears drive investors towards large-caps and the same is the case for Nifty Smallcap 100 and Nifty Midcap 100.

The monthly chart of Smallcap Index clearly screamed for a top in the last quarter of 2021. If the index fails to hold the 7600-mark in the coming weeks, a deeper correction towards 6500-6700 cannot be ruled out.

The Nifty Midcap 100 on the other hand is trading in an expanding pattern that is susceptible to strong and large-degree moves so it seems highly likely that the 2018 top in the Index 21,500-22,000 is likely to be tested.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)