Charts pointing to further declines: analysts

Chartists are painting a gloomier picture for benchmark indices in the next week or so as the rupee’s weakness is expected to weigh down investor sentiment. The Nifty may to see a further fall of about 3.5 percent in a week’s time, according to poll of five technical analysts by Business Standard.

On Tuesday, the BSE Sensex ended the day at 17968, while the NSE Nifty closed at around 5287 and the rupee fell by 3% to end the day at Rs 66.24 to the dollar. Benchmark indices fell by more than 3% as foreign investors dumped Indian shares.

Most analysts expect a rebound after a likely fall over the next week, but they do not expect the bounce to sustain.  

'The rupee is not showing any signs of relenting. While we are expecting a pull-back in equities, it will be a temporary one and will eventually lead to a fall,' said Shardul Kulkarni, senior technical analyst with Angel Broking.

Deepak Mohoni, director of trendwatchindia.com said the market outlook from a one-month perspective looks much better than it is now. 'There is not much worse that can happen from these levels for now. We are expecting some kind of bottom (in the market) soon,' he said.

Analysts are divided on the bottom-levels that could be breached by the indices. According to the analysts polled, the Nifty could fall to levels anywhere between 4600 – 5050 levels in the next few months. While some believe that it is still by about 3-4 months, other believe that it could be breached on the day of the F&O settlement.

'The F&O expiry date is expected to see a lot of volatility. The Nifty could bottom out on the expiry day and touch levels of 5050,'said A K Prabhakar, senior vice-president, Anand Rathi Financial Services.

For traders looking to make a quick buck, this market is flooded with opportunities, said the analysts. Calling it a ‘traders’ delight’, they said that this market provides opportunities to day-traders the most. 'It is a good opportunity for day-trader as intra-day volatility is very high. All the movement is happening during the day,' said Mohoni.

'Traders buying large-cap stocks should concentrate on taking hedge positions with the help of Nifty futures, Nifty put options and stock put options,' said Mathew.

For investors, however, there is still time before money can be made. Most analysts said that stocks with high dollar –exposure and are the best bets. Shares of export-oriented companies in the IT and pharma companies should be bought into these levels.