SGX Nifty Breaks 17,100; Can we see 16,800 Next Week?

The bearish tone is still prevailing in the global markets. The recovery we witnessed in the Nifty 50 from the magical support level of 16,800 seems to be fizzling out now. The global market sentiments continue to deteriorate which could probably give bulls a tough fight in the next week. So what all happened overnight that is taking a toll on the equity markets?

The major worry came in from the currency market as the USD/INR soared to a record high of 82.3 with a blistering rally. The Indian rupee has tumbled around 10.5% so far in 2022 which is a worrisome rate at which the rupee is plunging against the US dollar. This has become a primary concern for the equity markets. Oil prices have also gone up significantly in the last couple of weeks. On 26 September 2022, brent oil fell to around US$82.5 per barrel, and on 7 October 2022, prices closed above US$98.5 per barrel which is obviously not a good sign for a large oil importer such as India.

The US markets tumble on Friday with the Dow Jones closing below 29,300, which marked a high of 30,452 just two sessions ago. The ripple effect has been seen on the SGX Nifty which broke below 17,100 and closed the session at 17,070. Although, I was bearish on this expiry but didn't expect the markets to break below 17,100. So what could happen from here?

Firstly, our markets are highly driven by global cues therefore macro environment would be the prime determinant of the move. If the Dow Jones keeps on falling, the Nifty 50 would highly likely mimic the fall. So how the US markets perform in the next few days would largely decide the trend in the Nifty. The resistance of 17,500 remains intact, as discussed in the previous update. The support of 17,100 is now out of the way, the next major demand zone is around the magical level of 16,800. However, this level is expected to come if the Dow Jones retests its support of 28,700 - 28,800.

The short-term structure of the market remains negative with the formation of lower lows and lower highs (as can be seen from the chart above). The first sign of reversal would come when the Nifty breaks its previous peak of 17,428.8, till then it is a sell-on-rise market.