More market weakness ahead likely, possibility of a pullback rally; 5 things to know before opening bell

After a horrible Monday, Indian equity markets are looking at a positive start on Tuesday amid strong global cues. Nifty futures on the Singapore Exchange were trading 163 points, or 0.98 per cent, higher at 16,821.

Markets
Indian equity markets are looking at a positive start on Tuesday amid strong global cues (Fi;e Photo REUTERS)

After a horrible Monday, Indian equity markets are looking at a positive start on Tuesday amid strong global cues. Nifty futures on the Singapore Exchange were trading 163 points, or 0.98 per cent, higher at 16,821, signaling that Dalal Street was headed for a positive start. Markets ended in red in all five sessions last week. Investors have lost a a whopping Rs 11.45 lakh crore in two days as the domestic equity market continued to face severe drubbing on Monday amid a global selloff. Sensex plunged 1,189.73 points or 2.09 per cent to close at 55,822.01, while the NSE Nifty 50 index was down 371 points or 2.18% at 16,614 on Monday.

Nifty broke its higher high and higher low setup as all major support levels were taken out in the first hour of trade yesterday. Although some recovery was seen in the second half, we managed to close below key support levels. Asian cues are positive this morning. Some short recovery was seen in Nifty and Bank Nifty Futures as both the indices hit new panic lows. However, there are still significant shorts in the system. Nifty PCR trade in oversold zone at 0.73 while India VIX shot up above 20 level. Options concentration has gone too far at 16,000 Puts and 17,000 Calls. Some writing was seen at 16,600 Puts. FII’s continued to sell in cash and index futures. 16,800-16,850 should now act as a strong resistance for Nifty and any rise can be a good shorting opportunity with 16,950 as stop loss. Nifty 200 Day EMA placed at 16,290 which should act as decent support, said Rahul Sharma, Director & Head – Research, JM Financial Services Ltd.

Global cues

Hong Kong stocks opened slightly higher Tuesday morning after two days of hefty losses, though traders remain spooked over the fast-spreading Omicron virus variant. The Hang Seng Index edged up 0.22 percent. The Shanghai Composite Index slipped 0.06 percent while the Shenzhen Composite Index on China’s second exchange also eased 0.06 percent. Tokyo stocks opened higher with investors seeking bargains after a sharp fall in the previous session, shrugging off the rout on Wall Street. The benchmark Nikkei 225 index was up 1.45 percent in early trade, while the broader Topix index was up 1.25 percent.

US stocks ended Monday’s trading session down by more than 1%, pressured lower by surging Omicron coronavirus cases and a possible fatal blow to the $1.75 trillion US domestic spending bill, with oil prices plunging. The Dow Jones Industrial Average closed 1.23% lower at 34,932.16, while the S&P 500 ended the day down 1.14% at 4,568.02. The Nasdaq Composite dropped 1.24% to 14,980.94.

Technical view

A long bear candle was formed on the daily chart on Monday with gap down opening and with lower shadow. Technically, this pattern indicates a display of sharp downside momentum in the market with minor upside recovery. Nifty has broken below the crucial support of 16700 levels as per weekly timeframe chart. This is a negative indication and one may expect more weakness in the near term. Nifty as per long term charts like weekly and monthly remains negative and the bearish pattern intact. Any upside bounce from the lows could be a sell on rise opportunity for the near term, said Nagaraj Shetti, Technical Research  Analyst, HDFC Securities

The market has been in a violent decline for short term and the overall chart pattern indicates more weakness ahead for the near term. Having moved down swiftly in the last few sessions, there is a possibility of a pullback rally from the lower levels and that could be a sell on rise opportunity. The next downside levels to be watched are around 16200 (10 month EMA), which could be achieved in the next 1-2 weeks, he added.

Key support, resistance levels for Nifty

Nifty fell sharply on Dec 20 and then recovered part of the losses. Number of Advances is at the lowest since April 12, 2021. Omicron led lockdown fears, doubts about passing of Biden’s flagship infra spending bill and the RBI measure to withdraw/soak up liquidity resulted in this kind of a sell-off at a time when the institutions are anyway looking to take profits. While a small bounce in the Nifty is likely in the near term, Nifty has a good support from the 15860-16245 band where it may find durable support.16896-16966 band on the other hand could be a tough resistance on the upside, said Deepak Jasani, Head of Retail Research, HDFC Securities.

Stocks under F&O ban on NSE

Escorts, and Indiabulls Housing Finance are two under the F&O ban for December 21. Securities in the ban period under the F&O segment include companies in which the security has crossed 95 percent of the market-wide position limit.

IPO Watch

CMS Info Systems IPO: The initial public offer worth Rs 1,100 crore will open for subscription on Tuesday (21 December), and will close on Thursday. Ahead of the IPO, Mumbai-based CMS Info Systems, a cash management and automation solutions provider, commanded a good premium in the grey market. CMS Info Systems’ grey market premium (GMP) was steady at Rs 30.

MapMyIndia listing: MapmyIndia shares or CE Info Systems shares are going to debut on NSE and BSE today. According to the information available at the BSE website, equity shares of the company shall be listed and admitted to dealings on the exchange in the list of ‘B’ Group of Securities in Special Pre-open Session today (21 December). Market experts expect that stock to have a strong debut and the shares may open in the range of Rs 1500 to Rs 1800 levels against its upper price band of Rs 1033 per equity share.

Data Patterns IPO share allotment: Finalisation of Data Patterns share allocation is likely to be announced any time today as tentative Data Patterns IPO allotment date is 21 December 2021. Those who have applied for this public issue worth Rs 588.22 crore are advised to check their application status online by logging in at BSE website or at the official registrar of the IPO. The official registrar of the book built issue is Link Intime Private Ltd.

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