Indian markets losses widen, Sensex slips below 49,000 mark; Nifty Pharma outshines

Update:Indian markets extended their fall in the second half of the trading session and were seen trading near the day’s low. Sensex and Nifty have slipped below their important psychological mark of 49,000 and 14,700 levels, respectively. Around 35 stocks of Nifty 50 were trading in the red.   

Among the sectoral indices, the majority of the indices were trading lower, led by Nifty Financial Services and Bank Nifty. On the other hand, Nifty Pharma and Nifty Energy were trading in green.  

Indian markets opened Friday’s session with a gap-down amid a tsunami of COVID cases with daily count touching very close to the 4-lakh mark, which is nearly 4x the peak of the first wave of the pandemic. Adding to the misery is the news that the phase 3 mass vaccine drive, which was to commence from May 1 onwards could face hiccups at least in the state of Maharashtra.   

However, after the initial jolt, the benchmark indices have recovered from lower levels with Nifty reclaiming its important psychological mark of 14,800 and Sensex trading above the 49,400 mark. On the other hand, the broader markets bucked the weak trend and were seen trading with gains of nearly half a per cent. As a result, the advance-decline ratio seems to be in the favour of advancers.   

Among the sectoral indices, Nifty Energy and Nifty PSU Bank were the top gainers while Nifty Financial Services and Nifty Bank emerged as the top losers. Besides, India VIX has cooled off 2.22 per cent.   

On the earnings' announcement front, nearly 27 stocks are likely to announce their quarterly earnings today, which include big names such as Reliance Industries, Marico, and IndusInd Bank.   

Ahead of the results, the stock of Reliance Industries is trading flat with negative bias and it's down from the day’s high. The 2,000 Call option strike of Reliance Industries has an open interest of more than 10.5 lakh whereas, a maximum concentration of open interest is seen at 2,100 Call option strike with an open interest concentration of 17.57 lakh. Interestingly, this is the strike where maximum open interest addition has been witnessed in today’s session. On the Put side, the 1,900 Put option strike has the maximum concentration of open interest.  

During the week, Nifty bounced from the support line to the resistance in a brief span of 5 days. Even after seven attempts, two of them tested above 14,880 levels but Nifty failed to close above the multiple resistance area convincingly. Finally, it closed at 14,894, with just less than a quarter per cent gain. In fact, Nifty fell 150 points from the day's high on the monthly expiry day.   

On Thursday, Nifty opened above the laxman rekha (strong resistance point) i.e. 14,880 level and as the day progressed, it reclaimed its important psychological mark of 15,000. However, the volatility jitters of expiry day, dragged the index lower and closed around the resistance level itself. After retracing a little over 100 per cent of the prior swing, it failed to sustain at the higher levels.    

The price action of the day formed a bearish candle as the closing was lower than the opening level. However, it carries a higher high & higher low as compared to the prior bar, which indicates breather after a stupendous rally of nearly 900 points from the lower levels of 14,151.   

  The current upswing is the sharpest among three up-swings in the counter-trend consolidation phase. The earlier swings were restricted to 9 and 8 sessions, but the current swing is of just 5 sessions with about 6 per cent rise. The length of prior swings is 6 per cent and 5 per cent, respectively. So, this sharp swing needs follow-through days to continue further. Interestingly, the downswings are almost equal time-wise and price. Two downswings are with 8 days of length while one is 9 days long. All of them declined with an average of 6 per cent.    

This time and price movement is a shred of evidence that the current swing is at a mature stage. It is time to be cautious, as many of the indicators are in the overbought condition in a shorter period timeframe. During the last one month, Nifty traded mostly within the zone of 14,880-14,150. It tested these support and resistance levels several times. This tight range breakout on either side would lead to the sharpest possible move. It also tested the swing high of April 8 of 14,984 and moved above the 15,000 levels. However, it did not sustain and closed below the opening level.    

On a monthly chart, Nifty is forming a hanging man candle after an indecisive Doji candle. A decline in ADX (21.71) indicates the lack of strength in the index. The +DMI moved above the -DMI. As the market is lacking the conviction to continue the rally, we need to wait for a decisive close above the 14,900. In any case, if Nifty closes below 14,880 or 14,800, it would give us negative clues for the market direction. Furthermore, with exit polls predicting a tight contest between TMC-BJP in West Bengal with a slight edge to Mamata Banerjee, the markets could again feel tremors of volatility.