Sensex falls for fourth straight week, Nifty could fall to 18300; traders may prepare for a ‘buy on dips’ approach

Sensex falls for fourth straight week, Nifty could fall to 18300; traders may prepare for a ‘buy on dips’ approach

By Anand James

Sensex is off 4.2% from the record peak, but it has also recorded the fourth straight weekly down close since then. As is, we have dipped to the lowest since 30 June 2023. Formation and a neckline break of a conventional Head and Shoulders pattern point extended decline of 800-2,500 points, should we fail to close back above 65,200. News and events have been sold into, and earnings led rebalancing also appears to have happened. There is a willingness to push ahead, but there is no sign of euphoria, and most of the recent days have seen lower highs and lower lows, ample evidence of declining trends in play. Further, the ratio of 50 to 200 DMA for Nifty is at similar levels as in December 2022, post which a painful bear phase followed. So, yes the writing is on the wall with 18,300 on the horizon.

Meanwhile, for Bank Nifty, a couple of days of Dojis and positive closes did give a whiff of positivity, but they were not sufficient to signal a reversal, letting the prevailing downtrend aim for 42,780, which is another 1,000 points down. A direct rise above 44,200 could bring about short covering, but with upside prospects limited to 44,750.

USDINR on the other hand, is on the verge of a gigantic upside breakout. Since almost every month since October 2022, a visit to this region gave indications of a similar breakout, only to see momentum fizzling out quickly, the recent ascent has lacked the vigour and enthusiasm. But this move has several conditions that were lacking earlier, and presents the best opportunity to make large strides higher. Key factors supporting this construct are the approach of the general election dates, equities looking less attractive in the face of lofty prices, rising bond yields, and stress in China as well as multiple days of close above 83. With these in perspective, 83.7 to 84.5 may be aimed for with a downside marker placed at 82.9.

(Anand James,Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)