Indian indices Sensex and Nifty 50 are likely to start weak on Tuesday as well, following weakness in global markets.
Gift Nifty: The negative trends are also there for the Indian benchmark index with the reliance of the contract being around the 24,885 level, which is a discount of nearly 100 points from the Nifty futures' previous close.
Benchmark domestic equity indices ended in the red on Monday as they suffered the sixth session of losses.
The Sensex fell 638.45 points, or 0.78 per cent, to close at 81,050.00, while the Nifty 50 closed 218.85 points, or 0.87%, lower at 24,795.75.
On the daily chart, Nifty 50 formed a long bear candle, indicating further strong downside momentum.
"The positive chart pattern like higher tops and bottoms on the daily chart seems to have been negated by the Nifty 50 moving below the last higher bottom of 24,753 levels on Monday. Hence, this market action indicates that any upside bounces from here or from the lows could be short lived and that could possibly form a new lower top," Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
Shetti feels that Nifty 50's overall trend remains bearish and after falling below the important support of 25,100 - 25,000 levels in the recent past, Nifty 50 might move lower towards one more lower support of around 24,500 - 24,400 levels in the immediate future.
Nifty 50 and Bank Nifty forecast for today:
1. Nifty 50 Prediction:
Nifty 50 continued its sharp downside momentum for the sixth consecutive session on October 7 and closed the day lower by 218 points below the 25,000 mark.
"Nifty continued its downward move and tested the support zone of 24,750 - 24,800 levels in yesterday's session. In the short term, the index is in an oversold zone and a pullback from current levels can be seen that can take Nifty 50 towards 25,200 / 25,350 levels," said Aditya Agarwal Head of Derivatives & Technical Analysis at Sanctum Wealth.
However, he believes the undertone still remains bearish and any upside will be short lived and used by traders to initiate fresh short positions. A close below 24,700 can further deteriorate the sentiments and in that scenario, index can gradually correct towards 24,450 / 24,249 levels in the next few sessions.
This is being recommended by VLA Ambala, Co-Founder of Stock Market Today, to use a 'sell on rise' strategy in the market.
the volatility index surged 70% in the week, which is a signal to tread with caution, mainly for those who have less than two years of experience. To handle the volatilities, they can keep hedging their portfolio. Taking these factors into consideration, we can see that 24,630 to 24,470 will be quite supportive for the benchmark index Nifty 50 and some resistance will be seen between 24,930 to 25,040," Ambala added.
VLA Ambala, Co-founder of the Stock Market Today, said the market is likely to adopt the 'sell on rise' strategy.
"The volatility index jumped 70% this week, which is a signal to be cautious, particularly for investors who are less than two years old. In a manner of speaking, they should keep their portfolio hedged to temper the fluctuations. It would make this benchmark index Nifty 50 to gain support between 24,630 and 24,470 and face resistance between 24,930 and 25,040," Ambala said.
Dr. Praveen Dwarakanath, Vice President, Hedged.in in his analysis said that the Nifty 50 closed right at the key support of the 24,800 levels; again all momentum indicators have turned to the oversold region which can also be a possible reason for Nifty 50 to see once again a dead cat bounce which will still be short-lived.
2. Bank Nifty Prediction:
The bank Nifty index declined 983.15 points, or 1.91%, to close at 50,478.90 on Monday, forming a big red candle on the daily timeframe.
"Bank Nifty has closed below its support of 51,300 levels and also has broken the 20 EMA line indicating weakness in the index. The next immediate support for the index is at 49,500 levels which is 1,000 points away from the present closing.". The ADX DI-line is sharply rising with the ADX average line indicating that the weakness is to continue, says Dwarakanath, adding, "Options writer's data shows tremendous increase in call writing and short covering in ITM puts, indicating weakness in the index.
As Aditya Agarwal said, Bank Nifty will find immediate support around 50,100 / 49,750 levels and can see pullback from those levels. However, 51,260 / 51,840 would act as a strong supply zone for Bank Nifty and from those levels fresh selling can be seen.
