Frontline indices failed to capitalise on the gap-up opening as selling pressure mounted in the afternoon session. Sensex and Nifty closed the day at 34,779.58 and 10,453.05 levels, down 1.09 per cent and 1.24 per cent, respectively.
The fall was led by auto and metal stocks as Nifty Auto and Metal slipped 3 per cent and 2 per cent, respectively.
In the broader market, the Nifty Midcap and Smallcap fell 2.3 per cent and 2.6 per cent, respectively.
Investor sentiment took a huge blow after real estate developer SuperTech was downgraded to default rating. Indiabulls Housing Finance is reported to have a loan exposure of more than Rs 500 crore to SuperTech.
Markets are closed on Thursday for Dussehra.
With respect to direction, the market remains in a rally attempt since the Nifty did not breach its recent low. But it cannot be termed as a confirmed uptrend. On the flip side, if the Nifty breaches its recent low, the market status will be moved back to a downtrend.
Mustafa Nadeem, CEO, Epic Research, said: “A bearish engulfing pattern is seen on the daily chart. A bearish engulfing pattern is a classic reversal pattern when found on a higher timeframe such as a daily or weekly chart. It indicates the bears have a higher distribution at the levels that engulfed the day. While in a medium-term trend for Nifty being bearish, it further implicates the selling pressure at higher levels.
“The Nifty now has a support at lower levels of 10,250- 10,270 and beyond that, we may retest the 10,150 levels. Resistance is now clearly placed at 10,550 – 10,570.
Sahaj Agrawal, AVP- derivatives at Kotak Securities,said: “The Nifty recovered from 10,150 levels and tested 10,650-10700 levels. Crude has corrected from recent highs. This coupled with the strength in the rupee has reduced the external risks to the market. Profit booking was seen in Wednesday’s trading session after having rallied for 5-6 per cent in the short-term.
“Currently momentum is seen in the IT and Pharma space while Auto and Realty trade with negative bias.”