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After a strong rally in the last two trading sessions, domestic markets are likely to open flat-to-negative. At 16,230, SGX Nifty indicates a negative opening as Nifty futures on Tuesday closed at 16,254.95.
According to market experts, the recently rally was a technical pull back, mainly on account of buying emerged due to oversold condition and short covering. As foreign portfolio investors still remain on sell-mode, the rally is likely to remain short-lived.
However, concerns over inflation and interest rate hike could cap the upside, said Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services Ltd.
Signals from Asian markets are mixed. Though majority of stocks remained positive, Chinese and Hong Kong markets are down. Overnight, the US stocks closed on firm note, especially Nasdaq that gained 2.76 per cent.
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BofA Sec cuts Nifty target
The Nifty needed to surpass the narrow range formed in last three sessions for next directional move and as the index gave a breakout above 16000, said Ruchit Jain, Lead Research, 5paisa.com.
Meanwhile, BofA Securities has cut the Nifty index target to 16,000 from 17,000.
"We see flattish market returns from current levels as we cut our base case Nifty target to 16K (17K earlier) on faster than earlier expected tightening: a) front-loading rate hikes in the US with 50bp hikes in June & July likely to follow the 50bp hike in May; b) inflation beats BofA CPI of 6.8 per cent (YoY) in FY23 vs RBI's 5.7 per cent) and rate shock (recent off-cycle 40bps hike) in India," it said in a report.
Worst over?
According to Jain, "Now, a big question looking at today’s move is whether the markets have bottomed and started a new rally or is it just a pullback".
The index was trading around the previous low supports and the momentum readings were quite oversold; so the relief rally was much required. For a change in trend, market has to confirm with a higher-top higher-bottom structure which is yet to be seen and till then, one should take this as a pullback move, he further said.
Technically, the market is ruling at a crucial level. According to Choice International, “Nifty has been sustained above 21 & 50-HMA which indicates Northward direction for the upcoming session. However, the momentum indicators RSI & Stochastic were trading with a positive crossover and reversed from the oversold zone which is a sign of reversal in the Nifty.”
The Nifty may find strong support around 15,800 levels, while on the upside 16,400 may act as an immediate hurdle for the Nifty and crossing above this level can attract fresh buying. On the other hand, Bank Nifty has support at 33,800 level, while resistance at 35,500 level, it added.
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