Indian equity benchmarks slumped five percent in five days as the Nifty50 sank to its lowest closing level since July 30, 2021 on Thursday. A US inflation reading did little to calm the nerves of investors worried about high interest rates, elevated inflation and global economic growth.

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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, as it nears an important bottom of 15,671 (March 8), according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

He pointed out that the 50-scrip index has been in a sharp negative trend for a couple of weeks and expected to form a new lower bottom below 15,670. "The current weakness signals a type of selling climax, which normally is a part of important bottom reversals," he said.

Time to wait and watch

The Nifty has been resisting its 20-day exponential moving average on the hourly chart, a level that has come down to 16,040, said Ruchit Jain, Lead Research at 5paisa.com.

He suggests avoiding aggressive buy trades until then.

Here are key things to know about the market before the May 13 session:

SGX Nifty

At 7:37 am on Friday, Singapore Exchange (SGX) Nifty futures -- an early indicator of the Nifty index -- were up 168.5 points or 1.1 percent at 15,985, suggesting a positive start ahead on Dalal Street.

Global markets

Equities in other Asian markets looked stronger in early hours on Friday, with MSCI's broadest index outside Japan rising 1.3 percent despite a mixed session on Wall Street overnight.

Japan's Nikkei 225 and China's Shanghai Composite rose around one percent each, whereas Hong Kong's Hang Seng and South Korea's KOSPI gained two percent each. Singapore's Straits Times was up 1.5 percent.

S&P 500 futures were up 0.7 percent. On Thursday, the main Wall Street indices saw small moves around the flatline at the end of a choppy day, as investors juggled signs of peaking inflation with the prospect of more aggressive rate hikes. The S&P 500 declined 0.1 percent and the Dow Jones 0.3 percent, but the Nasdaq Composite eked out a gain of 0.1 percent.

What to expect on Dalal Street

HDFC Securities' Shetti is of the view that the short-term trend of the Nifty50 continues to be negative.

He feels the level of 15,670 is on the cards for the index in the coming sessions, and sees a higher possibility of it forming a lower bottom reversal around 15,500.

Important levels to watch out for

The sustained sell-off has taken the Nifty50 nearly 1,450 points below its long-term simple moving average.

Mohit Nigam, Head-PMS at Hem Securities, pointed out the following levels:

FII/DII activity

Call/put open interest

The maximum call open interest is accumulated at the strike price of 16,500, with 1.4 lakh contracts, and the next highest at 16,400, with 1.2 lakh contracts, according to exchange data. The maximum put open interest is at 15,800, with 1.3 lakh contracts, and 15,500, with 1.2 lakh.

This shows major resistance has shifted lower by 100 points to 16,400 and immediate support after 15,800 comes in at 15,500.

Long build-up

Here are five stocks that saw an increase in open interest as well as price:

Long unwinding

(Decrease in open interest as well as price)

Short covering

(Increase in price and decrease in open interest)

Short build-up

(Decrease in price and increase in open interest)

52-week lows

A total of 91 stocks on the BSE 500 — the broadest index on the bourse — hit 52-week lows. Two Sensex stocks were part of that group: Nestle and Wipro.

52-week highs

No stock on the 500-scrip index managed to touch the milestone.

Fear gauge

The India VIX — known in market parlance as the fear index — rose 6.4 percent to settle at 24.4, its highest close in seven weeks.

First Published:May 12, 2022 9:07 PM IST