Mumbai: The Bombay Stock Exchange’s benchmark index Sensex broke the 14,000 level in Tuesday trades for the first time this year and fell to 13,991 points before recovering to close at 14,106.58, down 1.3%, even as analysts warned of worse to come.
The Sensex has now fallen for five consecutive trading sessions. It has lost at least 10% in these five days and at least 33% since its peak recorded on 10 January.
Technical analysts say no level has any sanctity any more and claim the bears are tightening their grip on the market.
The National Stock Exchange’s broader 50-stock Nifty index also slipped below 4,200, yet another so-called significant support level, to close at 4,191.10.
“The worst-case scenario, for the Nifty index, could be close to 3,500 levels,” says Vijay L. Bhambwani, technical analyst and chief executive of Bhambhwani Securities Pvt. Ltd. According to him, the Nifty could fall “another 200 points from here in the next two to three sessions.”
Pune-based technical analyst Deepak Mohoni says “it will take only few sessions for the Sensex to break below 13,000”.
Angel Securities Ltd, a domestic brokerage, in a technical analysis note for clients on Tuesday morning, predicted a fall up to 13,880 for the Sensex and 4,150 for the Nifty.
Technical analysis is a technique that uses historical market data to predict future trends. Technical analysts normally employ models and trading rules based on price transformations, moving averages, regressions, inter-market and intra-market price correlations, cycles or through recognition of chart patterns.
According to Elliot wave theory, a popular technical analysis theory religiously followed by many such analysts, the Nifty could fall to 4,050-4,060, 3,849-3,859 or 3,504.
Some technical analysts are also advising their clients to remain short on the market through index derivatives as long as the downtrend continues. “We are really in a bear market,” says Rajat Bose, a Delhi-based technical analyst. Resistance levels are constantly broken during a strong downfall, he said. His advice to clients is to remain short on the Nifty until it goes above 4,360. Going short or short selling means selling stocks or indices which an investor does not own. Investors go short on the assumption that the priceswill fall.
Mohoni, better known for his tussle with the Bombay Stock Exchange over the the ownership of the “Sensex” brand, however, says that Indian markets could soon witness a relief rally. “The decline has been going on for eight weeks now,” he adds.
Not too many people buy that. Jignesh Desai, head of institutional sales at SBI Capital Markets Ltd, an arm of India’s largest lender State Bank of India, says “Indian stocks are oversold”.
A technical analysis note by Suresh Kumar Iyer of Mumbai-based brokerage Asit C. Mehta Investment Intermediaries Ltd, on Tuesday said “the last leg of corrections is on the cards.”