Sensex dips 2,100 pts a day with a new strain of COVID; Nifty50 can find support at these levels

Reversing the rally of the past 11 days, Indian equity markets fell 3 percent on Monday. BSE Sensex broke 1,407 points or 3 percent to finish at 45,553.96, the level last seen on December 8, 2020. During intraday trading, Sensex fell 2,132 points from the day’s high to hit the 44,923 level. While the broader Nifty 50 Index plummeted 432 points or 3.14 percent to 13,328.40 each. All 30 Sensex components ended up in the deep red sea, as there were only vendors. A number of factors led to such a drop in the S&P BSE Sensex in Monday afternoon deals. In today’s session, European stock markets opened with strong cuts after the new strains of the coronavirus reported in the United Kingdom. Following this, many European countries have temporarily banned flights from the UK.

Apart from this, Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online, that this correction was overdue in the market and he was trying to find a reason which he has now found. Today’s drop, according to him, is simply a profit reserve before the new year. Amid concerns over the new strain of coronavirus in the United Kingdom (UK), Union Health Minister Harsh Vardhan said today that the government is on high alert and there is no need to panic. Amid a heavy sell-off, investors witnessed a wealth erosion of more than Rs 7 lakh crore on Monday. The total market capitalization of companies listed on the BSE fell to Rs 178 lakh crore from Rs 185 lakh crore on Friday.

‘The markets found a reason for the correction’

Nifty 50 formed too widespread a structure in the charts Markets needed a reason for the correction found in the close of Europe. “13000 should still act as a sacrosanct support for the immediate near term and resistance at 13,650 for the Nifty 50 index,” Milan Vaishnav, CMT, MSTA, Gemstone Equity Research & Advisory Services Consulting Technical Analyst, told Financial Express Online.

Rajesh Palviya, Head of Technical and Derivatives at Axis Securities, told Financial Express Online that the Nifty 50 Index continued to move in an upper lower and lower lower formation on the hourly chart indicating a negative bias. “The pattern on the chart suggests that if Nifty crosses and sustains above the 13400 level, it would witness a buy that would drive the index towards the 13500-13600 levels. However, if the index breaks below the 13200 level, it would witness a sell that would take the index towards 13100-13000. Nifty continues to maintain an uptrend in the medium and long term, so buying on dips is still our preferred strategy.

Today, the Indian stock markets erased the gains made in the last 11 days. Shrikant Chouhan, Executive Vice President of Equity Technical Research at Kotak Securities, said that since the market formed a higher floor at 12790 on November 26, the market has never delivered a decisive daily candlestick pattern. Despite the uptrend and gained 1000 points in 15 days, Nifty made multiple indecisive candles in the middle. The same indecision ultimately resulted in today’s vertical drop. “It is a bearish reversal formation in the short term. Nifty could slide to levels 13000, where it has support according to Options data or 12500, which was the highest of the previous upward movement (highest levels of all time in Nifty until January 2020). On the upper side, 13400/13500 would be an obstacle zone, ”said Shrikant Chouhan.