Indian equity benchmarks — BSE Sensex and NSE Nifty50 — halted a three-day winning run on Thursday amid weakness in financial and IT stocks. However, strength in auto stocks and select heavyweights such as ITC and Titan lent some support.

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What do the charts suggest for Dalal Street now?

The Nifty50 has formed a long bear candle on the daily chart, signalling a downward reversal pattern of the recent uptrend, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

"This is not a good sign and one may expect further downside in the market ahead," he said.

More selling on cards

Bouts of selling could be seen in the market at regular intervals, said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

"Concerns about geopolitical tensions, a likely US rate hike and rising oil prices are still a potent threat to the market... After a promising uptrend rally, the Nifty found resistance near the important retracement level of 17,800. For traders, 17,500 and 17,400 would act as strong support and immediate resistance could be at 17,700 -17,800," he said.

Here are key things to know about the market before the February 4 session:

SGX Nifty

At 7:47 am on Friday, Singapore Exchange (SGX) Nifty futures -- an early indicator of the Nifty index -- were up 45.5 points or 0.3 percent at 17,564, suggesting a positive start ahead on Dalal Street.

Global markets

Equities in other Asian markets rose on Friday, shrugging off a slump on Wall Street overnight after a dire forecast by Facebook. MSCI's broadest index of Asia Pacific shares outside Japan was up 0.9 percent at the last count.

Japan's Nikkei 225 was up 0.4 percent. The China market remained shut for the Lunar New Year holidays.

S&P 500 futures were up one percent.

On Thursday, the S&P 500 fell 2.4 percent, the Dow Jones 1.5 percent and the Nasdaq Composite 3.7 percent, snapping a four-day winning run. Facebook-owner Meta lost more than a quarter of its market cap as its disappointing outlook sent its stock plummeting.

What to expect on Dalal Street

HDFC Securities' Shetti believes the benchmark index has reversed its short-term uptrend, and immediate resistance is now placed at 17,650. "Intense follow-through weakness from here could open more downside in the near term. A confirmation of the reversal is likely to drag the Nifty to 17,000-16,800 levels," he said.

The Nifty's short-term trend will turn bullish only after a close above the stiff resistance level of 17,800, said Manish Hathiramani, Proprietary Index Trader and Technical Analyst at Deen Dayal Investments.

He sees good support at 17,200, only a break below which on a closing basis will lead to resumption of the current bear market. "We are currently in neutral territory and hence a 'wait and watch' strategy should be adopted," he advised.

Key levels to watch out for

Nifty50: Immediate support for the index is expected at 17,500, and resistance at 17,700, according to Mohit Nigam, Head-PMS at Hem Securities.

Nifty Bank: For the banking index, he sees immediate support at 38,800 and resistance at 39,300.

FII/DII activity

Provisional exchange data shows foreign institutional investors (FIIs) net sold Indian equities worth Rs 1,597.5 crore on Thursday. Net sales by domestic institutional investors (DIIs) stood at Rs 370.6 crore.

Call/put open interest

Exchange data shows the maximum call open interest is accumulated at the 17,700 strike price, with 1.5 lakh contracts, and 18,000, with 1.4 lakh contracts. On the other hand, the maximum put open interest is placed at 17,200, with nearly 96,000 contracts.

This suggests that 17,700 has become a major hurdle for the Nifty, with meaningful support being at 17,200.

Long build-up

Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:

Long unwinding

(Decrease in open interest as well as price)

Short-covering

(Increase in price and decrease in open interest)

Short build-up

(Increase in open interest and decrease in price)

52-week highs

As many as 14 stocks in the BSE 500 pack hit 52-week highs, including Bank of Baroda, AU Small Finance Bank, Canara Bank, Gujarat Fluorochemicals, Deepak Fertilisers, Bharat Dynamics, GHCL, Amber and Asahi.

52-week lows

Two stocks in the broadest index on the bourse hit 52-week lows: Ceat and Akzo Nobel.

Volatility gauge

NSE's India VIX index — which gauges the expectation of volatility in the market — rose 2.7 percent to settle at 19.2 on Thursday, having jumped as much as 5.1 percent during the session.

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(Edited by : Ajay Vaishnav)

First Published:Feb 3, 2022 7:24 PM IST