- By Shrikant Chouhan
Since the beginning of May 2020, the market has started a painful period for traders. It has started the month with Black Monday and till date markets have witnessed Black Monday twice a time. In fact, the decline that has begun since January has been caused by the misfortunes of Black Monday. Since then, the market has plummeted Nine times on Monday. The fall, which started at the level of 9900, is violent and highly uncertain. Traders were prepared for this fall, which was missing in the previous fall (started from 12431). Generally, such a fall is less than expected. This wave pattern is called the 5th wave. Investors and traders, everyone’s mood, follow the same direction. In such a market, leveraged positions are very low and therefore the market becomes volatile. On top of that, the fallout is not broad-based. Few stocks or sectors bring the broader market down.
So far we have talked about the characteristics of the current wave. Now let us try to know what is becoming a Technical View on the market. After hitting the level of 9889 on 30th April 2020, Nifty is neither stabilizing at any level nor trending from any level. It has formed a bearish distribution formation between the range of 9000 and 9889 but it is rejecting to tread in the southward direction despite the market has broken the support of Neckline.
In the next few days, in case Nifty breaks the level of 8800 then the possibilities of trending fall would turn bright and in that case, Nifty may try to hit the levels of 8200 or 8000. However, on the other side, to turn bullish, Nifty needs to cross the level of 9889. Till then Nifty would remain highly volatile and would be more painful for traders. In brief, to complete the current wave, it is mandatory for the Nifty to hit the levels of 8000 on the minimum side. Above the level of 9900, Nifty would have scope to retest the levels of 10500.
Sector Specific: The most beaten-down sector is Financial. The index of PSU Banks and Private Banks were down by 17 and 16 per cent respectively. Nifty PSE and CPSE Etf suffered heavily in the recent sell-off and were down by 9 and 7 per cent respectively. The metal Index remained range-bound since 20th April 2020 and on the news of reopening of economies, it should come in flavour. Pharmaceutical is the only sector which is in positive territory and here the approach should be of “Top Down” means considering a bigger picture of the sector. Technically, it could be the next emerging sector with widespread choice to buy and hold at decent prices with a long term view.
(Shrikant Chouhan is Executive Vice President, Equity Technical Research at Kotak Securities. Views expressed are the author’s own. Financial Express Online advises you to consult your investment advisor before investing.)