Nifty firmly below 8000, brace for sharp fall ahead: Experts

MUMBAI: Fear has gripped the Indian market and traders are exiting long positions as their hopes of a faster economic recovery have got dashed amid weak corporate earnings, and prospects of sub-par monsoon. The breaching of 8,000 support on the Nifty is making bears more confident of further declines in the coming days.

"There is a little bit of panic now in the market. The panic is stemming from the domestic investors' over-commitment in the last two to three months at very high prices," said Ajay Srivastava of Dimensions Consulting.

"People are realising that they entered the market at the wrong time and that they are going to get stuck for a very long time at these levels. So, there is a kind of movement to get out, rather than buy on these dips," he added.

The index fell to about 7950 on Thursday and in the process breached the valid neckline support with bearish-engulfing candlestick. This confirmed the head and shoulders top on the daily chart in a convincing manner.

According to analysts, traders and investors should be cautious before averaging their positions in such a weak market. They should add only good-quality blue-chip stocks as the fall may deepen in the near-term.

"From here, all rallies should be sold into. Traders can hedge their portfolios using derivatives. They can use lower-level puts. If they have blue chips, it is good time to average them out. Traders need to look at their stocks carefully. They should not average out everything. They should average only the bluest of blue chips. Once the market turns, they will get into the money faster," said Ashwani Gujral, Fund Manager, ashwanigujral.com.

According to Gujral, traders should prepare themselves for a sharp downside.

"It appears that there could be another 300-400 points downside on the Nifty. That will change the way a lot of stocks look. Hence, be ready for that because the downside waves that we are seeing are about 800 points. So from 8,470, if Nifty takes a 800-point hit, then it will end trading at around 7,600-7,650 levels. This wave will be completed at around 7,650," he added.

A technical analysis report by Reuters states that bearish patterns on the NSE is increasing probabilities of declines till 7,200 levels. The bearish head-and-shoulder and cross of 50-DMA from above of 200-DMA has made the investors jittery, the report said.

Meanwhile, Mayuresh Joshi, Fund Manager, Angel Broking, is of the view that if the Nifty corrects further, valuations of some companies will be extremely attractive.

"I think every fall into the markets is a significant fall. I think slowly and steadily one can start accumulating qualitative stocks," he added.