Dalal Street: Downward spiral likely to continue amidst global uncertainties; check support, resistance levels

The domestic stock market indices extended their downward trajectory, marking the third consecutive session of a persistent sell-off in the week as the Investors rushed to exit their positions. The decline can be attributed to a combination of factors, including the lackluster performance of Indian Inc in the second quarter, mounting geopolitical tensions in the Middle East, and the persistent stickiness of US Treasury yields hovering around 5%.

“Till date, the actual domestic Q2 results are below par in comparison to the excited earnings forecasted. Similar disappointments are visible in developed economies. Downgrade in earnings and valuation is arising due to risk of further slowdown of the economy due to geopolitical and elevated interest rates. Also selling pressure intensified due to expiry-led volatility influencing investors to stay cautious,” said Vinod Nair, Head of Research at Geojit Financial Services.

“The Nifty opened gap down and continued to drift lower throughout the day to close in the red down 265 points. Since the last three trading sessions the Nifty has corrected 700 points and is appearing oversold on the hourly time frame chart. The Nifty has now reached the support cluster of 18,860 – 18,740 where support in the form of the 40 week moving the weekly lower Bollinger band is placed. Considering that Nifty has reached a support zone and is appearing oversold on the hourly charts, we can expect a pullback till 19,000 – 19,050 however it is likely to be only a temporary pause in the overall downtrend,” said said Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas.

“On the downside the Nifty is likely to drift towards 18,500 levels in the short term and the intermediate pullbacks should be used as a selling opportunity. In terms of levels, 18,700 – 18,650 shall act as a crucial support zone while 19,000 – 19,050 is the immediate hurdle zone,” Jatin Gedia added.