After a long hiatus, bears are starting to make their presence felt on Dalal Street. As a result, the bull-powered rosy outlook for Nifty at 12000 has been challenged by the sombre reality of the popular stock benchmark revisiting sub-10000 levels, something that hasn't happened in the last half-a-year. Volatility at high levels, a heavy supply of paper in terms of IPOs, and technical indicators are pointing to the Nifty sliding down to 9600 levels, experts said.
The bear-baiting had probably gone too far, and bears are now fighting back. The previous week ended March 16 in the initial stages saw up-move that put the bulls at a slight advantage. However, the Nifty subsequently dropped below March 9 closing, completely giving surrendering all of its gains. Prateek Jain, director, Hem Securities, said, "The Nifty is precariously poised above the 200-DMA (day moving average) of 10100. The weak structure will be negated only if Nifty manages to break above 10480 mark, till then it is advisable to remain cautious with long positions".
Fundamentally, there are many arguments like cheap earnings yield, or valuations for Indian equities, but the fact of the matter is that domestic markets have been trading at a premium to the average one-year forward multiple for quite some time. While the equity flows from the domestic remaining strong, the FII flows have been volatile to negative. A fatigue has set in.
"With the IPO/QIP market ready to see a huge supply of paper, we expect to see the market remaining soft in the near term till the time the market is able to absorb the supply. Hence, we are revising our trading range to reflect our belief to a range of 9640-10500," said a spokesperson of brokerage Prabhudas Lilladher Private Ltd.
Volatility is leading to unpleasant activity. The India VIX, a metric to track volatility, has closed at above 15%. Nobody expects a swift upturn, with investors being tactfully told to be prepared for some more pain. Brokerage ICICIdirect said, "Volatility has been unable to hold below 14%, which is leading to wild swings in the market within the range. We believe if the Nifty recovers above 10300, the comfort should come back. Otherwise, it may be a stock-specific painful scenario for some time. In the current fall from 10400, the Nifty has seen a short addition of 10%, which may keep the index under pressure for some time."
On an intra-day basis, the Nifty last traded sub-10000 in mid-October 2017. Revisiting those levels may be on the cards soon. Sameet Chavan, chief analyst-technical and derivatives, Angel Broking said, that now traders would keep a close eye on a recent swing low of 10141 as a slide below this crucial junction would reinforce the selling pressure in the market. "According to us, it's a matter of time now and hence, we would stick to our recent negative stance on the market and continue to expect Nifty testing sub-10000 levels."
Experts also warn traders not to make any kind of bottom-fishing soon and trade with a proper exit strategy. "For the coming week, 10260-10350 would now be seen as strong hurdles. Any possible move towards these levels is likely to get sold into," Chavan said.
BEAR HUG AHEAD
- The Nifty is precariously poised above the 200-DMA (day moving average) of 10100
- The weak structure will be negated only if Nifty manages to break above 10480 mark
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"With the IPO/QIP market ready to see a huge supply of paper, we expect to see the market remaining soft in the near term till the time the market is able to absorb the supply. Hence, we are revising our trading range to reflect our belief to a range of 9640-10500," said a spokesperson of brokerage Prabhudas Lilladher Private Ltd.
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