NEW DELHI: Markets witnessed a sharp sell off on Wednesday after a positive opening. Nifty ended sharply lower and closed near the lows of the day as it finally lost 302.95 points or 1.41 per cent to close at 21,150.15.
Broad market indices like the BSE Mid Cap and Small Cap indices lost more, thereby under performing the Sensex/Nifty, says Subash Gangadharan, Senior Technical and Derivative Analyst, HDFC Securities.
Nifty has broken its previous support of 21,337 and there has also been a negative moving average crossover as the 20 period MA has moved below the 50 period MA.
Momentum readings like the 14-day RSI too have declined sharply from overbought levels indicating a loss of momentum.
This is a negative signal for the near term and it also implies that the Nifty has now entered into a short term downtrend, Gangadharan said.
Further downsides are likely once the immediate support of 21,087 is broken.
We believe that the Nifty could play down towards the next major supports at 21,026-20,769 in the coming sessions. Any pullback rallies could find resistance at 213, he added.
Rupak De, Senior Technical Analyst at LKP Securities said the Nifty experienced a sharp correction as bearish sentiment persisted.
It failed to sustain above 21,500, resulting in increased call writing at the 21,500 strike, subsequently leading to a significant downturn.
At its lowest point, the Nifty dropped just below 21,100 before recovering to close above that level.
Looking ahead, there might be a consolidation phase for the Nifty in the near term.
Resistance is expected around 21,500, while support is anticipated at 21,100.