The Nifty made a weak start on Monday and shed nearly a percent, mainly pressurised by the domestic cues. It opened sharply lower in reaction to the Prime Minister’s latest statement that his government wouldn’t hesitate to make tough decisions like demonetisation in future and urged stock market participants to make fair contribution through taxes.

“Surprisingly, the market completely ignored the Finance Minister’s clarification that the government has no plans to tax long-term capital gains. Besides, caution ahead of derivative expiry of December month contracts added to the factors. The Prime Minister’s statement came at the time when sentiment is already down and markets are hoping for some favourable announcements,” said a report by Religare Securities.

The price movement in the market was certainly not so encouraging as the Nifty slipped below the important swing low of 7916.40 to post a new seven-month low at 7908.25, down 77.50 points. The Sensex fell by 233.60 points to close at 25807.10.

You may also like to watch

“Honestly speaking, we were not expecting this corrective move to extend below 8000. But it has happened and, thus, we need to now reassess the price development for next couple of days. Although, considering multiple technical evidences, we do not expect any major downside form the current level, we would like to stay on the sidelines and wait for a clear trend reversal on charts,” said Sameet Chavan- Chief Analyst- Technical & Derivatives, Angel Broking.

According to experts, one should stay away from creating fresh short positions as the market seems extremely oversold. For the coming session, yesterday’s high of 7970 would act as an immediate hurdle, whereas a sustainable move below yesterday’s low 7893.80 may lead to further weakness towards 7876– 850 levels.

“We feel traders should maintain extra caution now as Nifty is steadily drifting lower. And on expected lines, the slide in banking is causing maximum damage at present. Traders with a balanced trading portfolio – mix of long and short both – are still doing fine and we suggest maintaining that bias ahead as well,” said Jayant Manglik, President, Retail Distribution, Religare Securities Ltd.