The Indian stock market indices, Sensex and Nifty 50, are likely to open lower Thursday following weak global cues.
The trends on Gift Nifty also indicate a gap-down start for the Indian benchmark index. The Gift Nifty was trading flat at around 19,846 level as compared to the Nifty futures’ previous close of 19,972.
The domestic benchmark equity indices came under heavy selling pressure on Wednesday amid foreign fund outflow and negative cues from global peers.
On Wednesday, the Sensex closed with a loss of 796 points, or 1.18%, at 66,800.84, while the Nifty 50 ended at 19,901.40, down 231.90 points, or 1.15%.
Nifty 50 formed a long bear candle on the daily chart with upper shadow.
“This candle pattern indicates formation of a short term top reversal pattern in Nifty at the swing high of 20,222 levels. The unfilled opening downside gap of Wednesday hints at a possibility of bearish break away gap. Normally, bearish breakaway gaps are formed at the crucial top reversals. Hence, one may expect further weakness in the short term,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
Having moved below the immediate support of 10 day EMA (exponential moving average) at 19,940 levels now, the market is expected to slide down to the lower 20 day EMA around 19,780 levels in the coming sessions, he added.
Shetti believes the underlying trend of Nifty is weak and the overall chart pattern signals a formation of short term top reversal pattern at the recent new highs.
Nifty has dipped below its previous swing high on the daily chart, indicating a decline in bullish sentiment.
“Following a period of consolidation, the index experienced a correction, which could be considered as an early indication of a bearish reversal. Additionally, a negative crossover is evident on the daily RSI. In the short term, it is probable that the Nifty will decrease toward the 19,700-19,630 range,” said Rupak De, Senior Technical analyst at LKP Securities.
According to him, selling on rallies might remain a favorable strategy as long as the index remains below the 20,000 mark.
The Bank Nifty index came under selling pressure dragged by HDFC Bank, which had a detrimental impact on the index’s performance. The index tanked 595 points or 1.29% to end at 45,385 on Wednesday.
“The index breached the key support level of 46,000, which has now turned into a resistance level on the upside. To resume the upward momentum, the index would need to close above this newly established resistance. The immediate downside support for the Bank Nifty stands at 45,300. This level is critical, and a break below it is expected to trigger further selling pressure in the direction of the 45,000 mark.” said Kunal Shah, Senior Technical & Derivative analyst at LKP Securities.