Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
After showing an intraday upside recovery from the lows on Monday, Nifty witnessed sharp weakness on Wednesday and closed the day steeply lower by 391 points. After opening with a positive note, the market slipped into weakness in the early to mid part of the session. After the announcement of repo rate hike by RBI at 2pm, the selling pressure got intensified with high volatility during the mid to later part of the session.
A long bear candle was formed on the daily chart, that has broken decisively below the important support of 16900-16800 levels. The present chart pattern also indicate a downside breakout of the broader high low range movement of around 17400-16900 levels. This could be considered as a downside breakout of crucial lower support in the market. This is not a good sign and could have more weakness for the short term.
The area of 16800 has been instrumental with regards to a sustainable trend of Nifty in last few months. The market has displayed movement of around 1000 points after its downside breakout and next upside breakout of 16800-17000 levels in the past (24th Feb and 17th March respectively).
Having broken again below the important support of 16800, the chances of further steep weakness in the near term. This anticipated market action could open a possibility of larger degree of lower bottom formation below 15670 levels in the next few weeks. Any upside bounce from here could find strong resistance around 16800-17000 levels. Immediate downside targets to be watched for Nifty around 16200 levels.