‘Sell­ing clima' may have caused crash

Financial Chronicle - - DEEP -

THURS­DAY’S ses­sion was a com­plete shocker for the do­mes­tic mar­kets es­pe­cially af­ter a sig­nif­i­cant pull­back of Wed­nes­day. The bench­mark in­dices started the ses­sion with a mas­sive gap down open­ing fol­low­ing the frag­ile Asian cues. The world mar­kets col­lapsed post the sell­off in US mar­kets dur­ing Wed­nes­day’s ses­sion.

Yet again the mar­ket breadth turned in the favour of de­clin­ing coun­ters due to broad based sell­ing in midcap and smal­lcap coun­ters. On the sec­toral front, Nifty PSU Bank and Nifty Metal stocks were the big­gest losers whereas the Nifty Me­dia coun­ters out­per­formed the other groups. From the F&O space, stocks like Hind­petro (+16.61 per cent), MRPL (+11.25 per cent) and MCX (+6.88 per cent) un­der­went sharp re­cov­ery.

De­spite Thurs­day’s sell-off the ex­pected sup­port zone of 10,100-10,000 is still in­tact. Also, as shown in the weekly chart of Nifty a hid­den di­ver­gence is be­ing ob­served in RSI which can lead to a short-term bot­tom for­ma­tion. The mag­ni­tude of Thurs­day’s fall might be the re­sult of a sell­ing cli­max. Thus, the men­tioned zone is ex­pected to act as a ma­jor sup­port go­ing ahead and only a de­ci­sive move be­low the same might bring in fur­ther pes­simism.

On the up­side, 10,340-10,400 might now act as an in­ter­me­di­ate re­sis­tance above which the pull­back could get ex­tended to­wards 10,540 mark.

For the past few months the stocks have un­der­gone a strong rally and have cor­rected from the top.

Even the open in­ter­est data in­di­cates heavy po­si­tions in the cur­rent and near se­ries which in­di­cates a big­ger move.

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