Market begins week in the red; what should investors do on Tuesday?

Beginning the week on a negative note, key equity indices the Sensex and the Nifty ended in the red on October 26. The Sensex closed 540 points, or 1.33 percent, lower at 40,145.50 and the Nifty slipped 162.60 points or 1.36 percent to 11,767.80.

The top losers on the Nifty were Hero MotoCorp, Bajaj Auto, Hindalco, M&M and JSW Steel. HDFC Life, Nestle, Kotak Mahindra, IndusInd Bank and L&T were the top gainers.

Sectorally, the BSE metal was down 3.4 percent. The auto index shed more than 3 percent and the realty index plunged 2 percent.

“Indices saw more than a percentage cut today as several countries in Europe are slated to go into a lockdown,” said S Ranganathan, Head of Research at LKP Securities.

“Auto stocks were pounded today on apprehensions of a softer festive season and the late afternoon selling in the metal stocks pushed Indices into the red during the earnings season. Value-buying was witnessed today in insurance companies and mid-cap cement stocks,” he said.

Here is what experts say on what investors should do on October 27:

Shrikant Chouhan, Executive Vice President, Equity Technical Research, Kotak Securities

After the struggle of the last five days to sustain and close above 11,850, the Nifty finally gave up.

The index formed a large red/black body candle that would not allow the market to sustain at higher levels.

The sell-off was so intense that Nifty dropped to 20-day SMA without any meaningful support, which was at 11,715.

However, due to extreme oversold activity, the Nifty reversed sharply from the levels of 20-day SMA and closed at 11,767.

Technically, the market is ready to hit 11,600 on the minimum side and in the worst-case scenario, 11,428 levels.

The strategy should be to short Nifty if it bounces to 11,830/11,850 with a final stop loss at 11,900 or below 11,710. We expect further weakness in the Bank Nifty if it breaks 23,770 levels.

Deepak Jasani, Head of Retail Research, HDFC Securities

The Nifty has filled the up-gap formed on October 19 and showed a lower top formation. The level of 11,661 is the crucial level, a fall below which would mean a lower bottom formation in addition to the lower top.

On the upside, 11,876-11,897 could provide resistance.

Vinod Nair, Head of Research at Geojit Financial Services

Volatility was expected as we are nearing the US election date. The prices are high which limits the capacity of the market to handle uncertainties, though the final outcome of the election is unlikely to change the long-term trend of the global market.

Rising COVID cases in the US and Europe and delay in the US stimulus has added worries.

Indian markets correcting from the recent rally, which has factored a lot about an up-trend in earnings growth due to positive Q2 results.

Indian indices are expected to remain weak in the near-term and will be driven by Q2 results and developments in the US. A big correction is unlikely with 11,500 acting as strong support for Nifty50.

Ajit Mishra, VP – Research, Religare Broking

The news of rising COVID cases across Europe and the US is haunting markets across the globe, including ours.

Besides, participants are hoping for some clarity on the stimulus package before the US election.

Amid all, domestic earnings announcements are adding to the volatility as well. We feel it’s prudent to maintain positions on both sides in stocks despite the prevailing consolidation bias in the Nifty.

Chandan Taparia, Vice President and Analyst-Derivatives at Motilal Oswal Financial Services

The Nifty formed a bearish belt-hold candle, which indicated that the bears dominated the market for the most part of the session.

Mechanical indicator RSI has given a decisive negative crossover on the daily scale that doesn’t bode well for the bulls to get the stability.

Now till it doesn’t go past the above immediate hurdle of 11,850, more weakness could be seen towards the next key support of 11,666 while on the upside, resistances are shifting lower to 11,950 from 12,020 marks.