The market may decline further

Today, the Sensex closed down 2.22%. This was a massive sell-off; only 73 stocks advanced, while 2,753 declined. We haven’t seen such dire conditions in several months. The Bank Nifty was down more than 3.50% due to the RBI’s new rules limiting net positions in the onshore currency market.

Technically, the market broke a key support line at 72,500 and closed at 71,947. Based on the current market structure, 72,500 could pose a significant hurdle for the market in the short term. Below these levels, the market could soon decline to 71,300/71,000.

“A close below 71,000 would raise further concerns,” says Shrikant Chouhan, Head - Equity Research, Kotak Securities.

However, given the current pattern of sudden price declines in a short period of time, medium- to long-term investors may be tempted to invest in certain stocks.

Above 72,500, we may see some short covering, which could take the index towards 73,100 levels.