Market structure is weak

Mumbai, May 10: Heavy selling was seen in benchmark indices on Thursday, Sensex closing 1062 points lower. Among sectors, profit-booking was seen at higher levels in almost all major sectoral indices, but energy and metals indices declined the most by about 3 per cent.

Technically, after a gradual start, the market broke the 73,200 support level and selling pressure intensified after the break. On the daily chart, the index has formed a long bearish candle, which supports further weakness from the current levels.

“ We believe that the short-term market structure is weak, but due to temporary oversold conditions, we may see a pull-back rally from current levels,” says Shrikant Chouhan, Head Equity Research, Kotak Securities.

He also added “For day trader 72,550 would act as the trend-deciding level Above 72,550, the market may bounce to 72600,” says Shrikant Chouhan, Head Equity Research, Kotak Securities

On the other hand, weak sentiment is likely to continue below 72,550. Below that the market can slip to 72100-72000-71700.

Gains in overseas markets are likely to help local benchmark indices register gains in early trades Friday after yesterday's sharp sell off. However, caution would be the buzzword amid pre-election jitters and intra-day volatility could continue as the election phase gathers momentum.

Another worrying factor has been the pace at which FIIs have been deserting Indian equities in the current month so far, which has been making local investors nervous.

“With inflation in the US staying high, and the American central bank hinting that it is in no hurry to cut rates, FIIs are pulling money out of emerging markets such as India,” says Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

Sensex technical landscape also suddenly looks treacherous again as it is now way below its 21-DMA and 50-DMA with probable double top pattern on the daily charts.