[1]It was a recipe for disaster, and the mayhem could continue. Analysts see the Sensex losing another 500 points and the Nifty going down to 4,650 with a downward bias.
The bailout of a Spanish bank, the European and emerging markets stocks hitting an eight-month low, and the sabre rattling by the two Koreas, plunged the Sensex into the red on opening bell on Tuesday.
It tanked further when the European markets opened in the red and hit the day’s low of 502 points in late afternoon trade and intra-day went below 16,000 for the first time since February 11. It closed at 16,022.48, down 447 points. The Nifty went below 4800 intra-day for the first time since February 16, to close at 4806.75 down 137 points.
“The huge turnover of Rs 1,65,791 seen on Tuesday, points to strong weakness which could continue for some time,” said Mr Pradip Hotchandani of Anagram Securities.
After the crucial level of 4,842 was breached, all hopes were shattered and those who were long resorted to stop loss and exited. An open interest position of Rs 1,45,000 crore in the derivative segment, if not rolled over significantly or cut, will cause more mayhem on Wednesday.
Mr Ashish Chaturmohta of Anand Rathi Financial Services says that there could be a further correction of four to five per cent from here with a downside.
Most of the correction will be in the banking and metal stocks as there is an open interest build up in these stocks.
The Nifty could see an upside resistance of 4950. The signals are weak, he said as the Nifty has broken both its simple and exponential 200 day moving average.
Some analysts said selling could have also been triggered by brokers asking for margin payment. If the clients didn’t pay they would have offloaded the shares putting further pressure on the Sensex.
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