Nifty and Sensex ended Wednesday’s trading session deep in red. The Nifty 50 slumped 338 points at 21,997.70. While the Sensex ended 906.70 points after plunging over 1100 points intra-day at 72,761.89 points. The biggest Index losers included power stocks like Power Grid, Coal India, NTPC and Adani Group stocks like Adani Ports, Adani Enterprises. The Indian Volatility Index (India VIX) closed 5.79% higher. 

 Nifty Bank pulled back over 300 points  to settle at 46,981.30. The Nifty Midcap 100 tumbled over 2200 points and settled down  4%  at 45,971.40. 

On the sectoral front, media and metal stocks fell most among their peers. Similarly, the broader indices saw a heavy selloff, with smallcap and microcap stocks bleeding the most. 

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“It seems like largecaps have joined the correction in smallcaps and midcaps which have been under severe selling pressure in the last few days. Nifty has a derivatives support at 22,000 so any sustenance below the same should be taken as an indication of caution for longs. The only silver lining today has been in select private banks and FMCG stocks which have held their ground amidst a market-wide selloff,” said Rahul Sharma, Head of Technical and Derivatives Research at JM Financial Services.

After spending nearly a week in a narrow range, markets finally plunged and lost 1.5%. After the initial uptick, Nifty drifted gradually in the initial hours however the pace of decline intensified as the day progressed. Eventually, it settled closer to the day’s low at 21,997.70 levels. The selling pressure was widespread wherein metal, realty, and energy lost over 5% each. The broader indices extended their prevailing bias and lost in the range of 4%-5%, said Ajit Mishra in a market closing comment.

“It is a double whammy for participants as Nifty has slipped below its immediate support of short-term moving average i.e. 20 DEMA and also breached the trendline support while midcap and smallcap space are already under tremendous pressure. We suggest maintaining negative bias in the index now and utilizing rebound to create short positions. At the same time, traders shouldn’t add to their loss-making positions and prefer index majors over others,” said Mishra.

“The bears maintained full control as the index faced rejection at the 47500 mark, establishing it as a strong resistance zone. The index continues in a “sell on rise” mode until this resistance is overcome on a closing basis. Moreover, breaching its 20DMA suggests a follow-up selling pressure that could drive the index lower toward the 46000/45500 mark,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Nifty finished the day close to the 22,000 level which is around 2.3% below its all-time high of 22,526. However, there is a sense of distress and despondency among retail investors today. The dichotomy underlines the risk arising from many investors’ inclination to chase momentum and speculative stocks rather than invest sensibly in a well-balanced portfolio. The tilt toward broader markets is also reflected in the recent mutual fund data showing inflows into small/microcap funds despite the 60-65% rally in the CNX Smallcap index over the last year, said Gaurav Dua, Senior Vice President and Head of Capital Market strategy at Sharekhan by BNP Paribas. 

“…we strongly believe that a balanced portfolio with the right mix of largecap, midcap, and smallcap give comparable returns over the market cycle (bull & bear phase) with lower risk and more stability. Accordingly, we have designed and managed the in-house PMS strategy. In terms of outlook, we believe that the Nifty could consolidate in a range whereas the volatility could rule in a broader market which could wipe out the speculative fourth and is healthy for a sustained rally going ahead,” Dua said.

The midcap index broke the Triangle pattern on the downside on March 13. The crucial support level for the Nifty Midcap Index at present is placed at 45150 – 45000. The smallcap index has reached the psychological level and 20-week support zone of 15050 – 15000. The Next support zone now stands at 13821 – 13766 which coincides with the 61.82% Fibonacci retracement level of the rise from 12048 – 16692 and the 40-week moving average, said Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas. 

A big down day at the markets yesterday which was probably the worst since the middle of Jan’2024. The bears just looked determined and well in control right from the open and effortlessly took prices lower the entire day. The fall was across the board and hence damaging. It was clearly a day in favour of the bears. It was one of the weakest sessions of recent times. The momentum was very strong on the downside in yesterday’s trading session. The fact that the index lost 338 points “during the day” in yesterday’s trading session and not by way of a gap is an important takeaway, said Tejas Shah, Technical Research, JM Financial & BlinkX.

“The broader markets underperformed as compared to the mainline indices. The Small-cap index also underperformed by closing deep in the Red. Midcap and smallcap stocks were major losers and declined more than 4% to 5% each. Support for the Nifty is now seen at 21,800-850 and 21,500 levels. On the higher side, immediate resistance for Nifty is at 22,100-125 levels and the next resistance zone is at 22,250-300 levels. Overall, it would be interesting to see whether a follow-up selling occurs today or not,” said Tejas.