It was the fifth straight week of losses and the second consecutive week of deep cuts for the Indian equity market. The inflation concern and monetary tightening across the globe are key concerns for the equity markets. Equity markets are under the strong grip of bears. However, they look extremely oversold and due for a pullback rally. The sell-off in the US market especially in tech stocks was very severe and there is some stability in the last two trading sessions that may provide some respite to the bulls.
There are no major cues for the next week; therefore direction of global cues will be important and some stock-specific movement will be continued amid the tail-end of Q4 earnings. On the domestic front, the listing of LIC IPO will be a key sentimental trigger for the Indian equity market.
FIIs are selling relentlessly whereas DIIs are trying to compensate for their selling; therefore their behavior will also play an important role in the direction of the market. The movement of the dollar index, crude oil prices, and the direction of the rupee will be other important factors.
If we look at the derivative data then FIIs’ long exposure in index future stands at 24% and the put-call ratio is sitting at the 0.73 mark; both are in extremely oversold territory.
Technically, the Nifty is trading near the previous swing low of 15670 and most of the momentum indicators are trading in oversold territory; therefore, we can expect a bounceback towards 16180/16400 levels while if the Nifty slips below the 15670 level, then selling pressure may be intensified towards 15500/15000 levels.
Bank Nifty is also continuing its southward journey and 33000 is an immediate psychological support level where we can expect some bounceback while below, the 33000 level, 32000 will be the next important support level. On the upside, 34000/34500/35000 will be important hurdle.
Santosh Meena, Head of Research, Swastika Investmart Ltd.