Sensex slips below 50,000. Should you buy the dip?

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Indian stock markets began the trading week with huge losses hit by rising US bond yields, and fears of Covid-19-led lockdown.

Benchmark indices ended the fifth consecutive trading session in the red as the S&P BSE Sensex crashed by over 1,100 points to close at 49,744 while the Nifty50 was down by more than 300 points to end the day at 14,675.

The broader markets, however, felt lesser pain with the S&P BSE MidCap and SmallCap indices closing 1.34% and 1%  down, respectively.

Barring the metal index, all sectoral indices also shut shop in the red today. Heavy selling pressure was visible in energy, realty, IT, auto, and capital goods stocks.

Here’s what experts say investors must do tomorrow:

Mudit Goyal, Research Analyst, SMC Global

Technically, Nifty can give more correction upto 14,450 levels because there is a gap on charts so Nifty can try to fill that gap, which was formed on 02nd February.

From current levels, Support is seen around 14,500-1,400 levels and on the higher side, 14,850-14,900 may act as a resistance zone for Nifty.

Manish Shah, Founder, Niftytriggers.com

Nifty saw a fast decline as it lost 300 points over the close of the previous day. The price action showed a long red candle that has closed that the lows of the day and the range of the candle highest in the last 8-10 days. Nifty has now declined towards the previous swing high at 14,650-14,750 which is a previous swing high. Nifty has retraced 38.2% of the post-budget rally and Nifty has hit a rising 20-period moving average.

If Nifty violates 14,600 and holds then expect further decline towards 14,370-14,350 and below that to 14118. Any upsides in Nifty could face selling around 14,750 and above that to 14,865.

Nifty is in oversold territory as short-term oscillators show oversold reading. After a fall of such magnitude, there is a relief rally. As we go into the last few days of February expiry expect the volatility to be high.

Shrikant Chouhan, EVP, Equity Technical Research, Kotak Securities:-

Markets fell more than 2% led by weakness in financial stocks following a sudden rise in 10-year bond yield across the world. India’s 10-year GSec, which was at 5.71, has started trading at 6.20, however, in the US it was at 0.31 in the month of March 2020 and now it is quoting at 1.38. The rise in bond yields controls liquidity and money starts flowing back to developed markets from emerging markets.

Today, Nifty/Sensex has broken crucial support of 20 days SMA, which was at 14,780/50,150 and also the retracement support, which was at 14730/50100 levels. India’s volatility index has also jumped to 25.82, which is a 16.04% rise in a single day.

It is negative for the market as it signals further weakness in the market. The next level to watch out for would be 14,500/49,340, which is a 50% retracement of the previous up-move started from the lowest levels of 13,600/46,160.

As the market is approaching the monthly expiry of the current month, the market could bounce back from 14,500/49,340 levels. The short term and medium-term strategy should be to buy on dips. On the higher side, 14,900/50,400 and 15,000/50,600 levels would be immediate hurdles. Our advice is to invest in strong companies between 14,650/14,550 levels with a medium-term view.