The equity market may continue with its losing streak, according to derivative experts. On Tuesday, Nifty slid 89 points to close at 5,526.
?The Nifty?s recent movement is a third instance in the last seven months when a sharp upmove is followed by consolidation and an eventual decline. In the last instance the market lost about two-third of the gains made. If that pattern has to get repeated, the Nifty is likely to move towards 5,330-5,325 levels,? said Savio Shetty, a derivative analyst at the Institutional desk of Prabhudas Lilladher. This implies a correction of 3.5% from current levels.
Nifty?s inability to move past the 5,750-mark and the subsequent decline seen in recent days has made the market believe that a dip towards 5,300 levels is a possibility, that is if Nifty goes below 5,500 levels.
According to T S Harihar, derivatives co-head at ICICI Securities, ?November onwards, the market has consistently made ?lower tops? which translates into a bearish sentiment. He said after a decline below 5,600 level, the market may continue its descend towards 5,200-5,000 during this earnings season which could turn to be a value-buying opportunity for the investors.
According to Vijay Kanchan, head of institutional derivatives at JM Financial, 5,500 has turned out to be the crucial near-term support for the market given the presence of near to medium-term moving averages for the Nifty hovering around these levels. ?Nifty may find a floor near 5,500 due to presence of both the 20 and 50DMA (Day Moving Averages) near this level,? said Kanchan. In the previous two trading sessions, the Nifty July future added close to 2.5 lakh shares while the Nifty Put Call Ratio (PCR) has declined from 1.41 on Thursday to 1.17.
As on Tuesday, while Nifty July 5,500 calls added the maximum open interest of 21.7 lakh shares for any strike price on the call side, 5,500 puts also witnessed a reasonable addition of 7.7 lakh shares in the open interest. On the call side, the highest open interest of 21.6 lakh shares was added by Nifty July 5,300 calls depicting a build-up of the support level post 5,500. Shetty pointed out that there has been a rise in the open interest of in-the-money 5,500 calls which is a bearish sign. However, he said the sustained addition of open interest in 5,500 puts indicates that the bulls would be struggling near this level before the bears rein in.