Benchmark indices Sensex and Nifty hit new all-time highs of 30,024 and 9,119 respectively at the start of March 2015 after a surprise repo rate cut announcement by the RBI. However, the initial euphoria evaporated quickly as the markets entered a corrective phase and continued to lose ground even after discounting the positive news of the postponement of a rate hike by the US Federal Reserve.
Commenting on the market outlook, ICICIdirect opined, 'The benchmarks Sensex and Nifty breached the immediate support readings of 28,000 and 8,470, respectively. The benchmarks surrendering the immediate support implies that the momentum driving the past 18 months bull run is subsiding and opens the door for a test of the next major support placed at 27,000, 8,100 levels being the value of 200 day EMA. We expect the current fall to get arrested near the 27,000, 8,100 region. Therefore, any declines from here on would make a strong case for fresh buying as we expect a meaningful bounce back to play out from the support threshold, which will lead the benchmarks towards 29,000, 8,800 levels in the coming months.'
The sharp sell-off on the expiry session of the March series saw the benchmarks surrender the key immediate support of 28,000, 8,470. The current down-leg from life-time high of 30,024, 9,119 is now the largest in magnitude terms in the entire up move since August 2013. It indicates a broadening profit booking trend and suggests further time and price consolidation in the coming month, it said.
“We believe the medium-term floor for the benchmarks is placed near 26,970, 8,100. The 200 day EMA is currently placed around 26,970, 8,100. A pullback to the long term average after a span of over a year is bound to trigger value buying, the broking firm said.
The confluence of the technical parameters makes the 27,000, 8,100 levels a strong support zone where value buying will outstrip supply and mark an important bottom for the benchmarks. Therefore, we firmly believe that any dips from here on would make the markets attractive from the perspective of long term investors and the current correction should be used as an incremental buying opportunity.
ICICIdirect expects benchmarks to undergo a consolidation near the support threshold and produce a pullback towards the immediate barriers placed at 29,000, 8,800 over the coming months. Our preferred stock picks are Mahindra & Mahindra, Voltas and Multi Commodity Exchange, it said.
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