Oversold markets need to pull back, license listing will be key sentimental factor

It was the fifth consecutive week of losses and the second consecutive week of deep cuts for the Indian stock market. Concerns about inflation and monetary tightening around the world are major concerns for stock markets. The stock markets are in a strong grip of the bears. However, they look extremely oversold and due for a bounce. The sell-off in the US market, especially in tech stocks, has been very severe and there is some stability over the past couple of trading sessions that could give bulls some breathing room.

There are no major clues for next week; therefore, the direction of global signals will be important and some stock-specific moves will continue amid the tail end of Q4 earnings. Domestically, the LIC IPO will be a key sentimental trigger for the Indian stock market.

FIIs sell relentlessly while DIIs try to offset their sales; therefore, their behavior will also play an important role in the direction of the market. The movement of the dollar index, crude oil prices and the direction of the rupee will be other important factors.

If we look at the derivative data, the FII’s long exposure to index futures stands at 24% and the put-call ratio stands at 0.73; both are in extremely oversold territory.

Technically, the Nifty is trading near the previous low of 15670 and most momentum indicators are trading in oversold territory; therefore, we can expect a bounce towards the 16180/16400 levels while if the Nifty slips below the 15670 level, then the selling pressure can be intensified towards the 15500/15000 levels.

Bank Nifty also continues its journey south and 33000 is an immediate psychological support level where some bounce can be expected while below that the 33000 level, 32000 will be the next important support level. On the upside, 34000/34500/35000 will be a significant hurdle.

Santosh Meena, Head of Research, Swastika Investmart Ltd.

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