Near-term pain seen for Nifty, may find support at 17,000 levels: Analysts

Sharp decline in markets on Monday in line with broader selloff in global equities amid concerns over US Fed's upcoming meeting where it is likely to signal a rate hike, balance-sheet reduction

Analysts expect more pain for the Nifty in the near term but see support for the index at 17,000 levels.

Indian markets witnessed a sharp decline on Monday in line with a broader selloff in global equities amid concerns over the Federal Reserve’s upcoming meeting where it is expected to signal a rate hike and balance-sheet reduction for the year. Consistent selling from foreign portfolio investors, rising global crude oil prices, geopolitical tensions between Russia and Ukraine and mixed quarterly results so far have weighed on market sentiment, said experts.

“The Nifty breached a critical support level at 17,150 and pierced through the 100 days EMA on Monday. The index had shown a three-black crows pattern last week which confirmed the uptrend reversal and beginning of a down trend. Derivatives data shows support at 17,000 levels and beyond that at 16,500 levels. The pre-Budget week has been negative for eight out of the previous 14 times, so we expect the volatility to continue till Budget day,” said Sonam Srivastava, smallcase manager & founder, Wright Research.

“The pace of correction has been faster and individual stocks have gone down substantially. Those who have bought beta stocks have suffered the most. We have not seen any major short formation of indices and the recent correction has been due to unwinding of long positions. The index could correct significantly if it falls well below 17,000-17,200 levels, which is a support zone,” added Siddarth Bhamre, Director - Alternative Investments and Research at InCred Capital.

An exceptionally long negative candle was formed on the daily chart with minor lower shadow on Monday. “Technically, this pattern indicates a selling climax in the market and could be hinting at a possibility of bottom reversal in Nifty around the crucial support of 16,900-16,800 levels in the next few sessions. Confirmation of bottom reversal could open a quantum of an upside bounce from the lows,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Global cues and the upcoming Union Budget would be the key factors driving the market direction in the near term, according to market watchers. On the political front, developments in the upcoming assembly polls in five states would also be closely monitored.

“After correction of more than 7 per cent from its recent peak, Nifty may now find some support near the psychological level of 17,000. Some of the heavyweight stocks have corrected around 8-10 per cent and offer better entry opportunity for long-term investors,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.