Nifty could correct upto the previous breakout level of 9700, say technical analysts.
Technical analysis experts are jointly calling out to the investors to brace for a correction. Today, Nifty fell below the 9,800 mark for the first time since 18th of July. At the end of Thursday, Nifty closed at 9,820.25, down by more than 87 points. The BSE Midcap and Smallcap indices lost more than 1 percent for the third consecutive session today. Industry experts expect further downside on the basis of technical indicators.
According to Ruchit Jain, a technical analyst with Angel Broking, “ We expect markets to consolidate in near term. During this consolidation phase, the index could correct upto the previous breakout level of 9700, which could now act as a support as per the role reversal technique of Technical Analysis.”
Ruchit Jain pointed out that, Since January 2017, the Nifty index has rallied significantly from 7,894 to the recent high of 10,138 without any meaningful correction. According to him, so far the corrections within this uptrend were time-corrections rather than price corrections.
Commenting on the monthly charts, Jain explains, “if we observe the monthly charts, the index has reached the ‘Upward Sloping Trend Line’ resistance. This coincides with the 100% ‘Price Extension’ as well as ‘Time Extension’ of the previous up move from 7,893.80.” Ruchit Jain believes that on the flipside, the index is likely to face resistance in the range of 9950-10050 on any pullback moves. According to him, this corrective move is a part of the broader uptrend and thus, long term investors should use such corrective dips to accumulate quality stocks in their portfolio.
Gautam Shah of JM Financial believes that the markets are going to get a lot more uglier on the back of broad based technical indicators such as the Volatility Index, and simultaneous fall in small and midcap indices. In conversation with CNBC TV18, Gautam Shah pointed out that the India VIX, is at 13, and is threatening to go to up to the levels of 16, indicating that this time around we are in for a meaningful correction. India VIX refers to the India Volatility Index, an index disseminated by the NSE. It measures the degree of volatility or fluctuation that active traders expect in the Nifty50 over the next 30 days. To simplify, a VIX of 13 means that, for the next one month, market participants expect the Nifty to move by an annualised rate of 13 per cent in either direction.
Gautam Shah advised against entering the markets at the current levels. Further, Shah said that Nifty has lost 2% from the top, and if this comes as a meaningful correction, the index may further go down by 5-7%. According to his estimates, over the next couple of months, the Nifty to go down to sub 9,300 levels. For the extreme short term, Shah predicts a level of 9,700 as bulls may try to protect that psychological mark.
The brokerage and investment firm CLSA believes that Indian markets will grow at low double digit growth in the next one year. Sharing its outlook for various sectors, CLSA pointed out that IT has become a low growth sector, and investors should not expect double digit growth going forward.