After The Bell: Another 3-4% fall possible! Here’s what investors should do on Friday?

The texture of the market has changed from a ‘buy on dips’ to a ‘sell on rallies’ market after benchmark indices fell by more than 2 percent each on October 15 after rallying for 10-days. The Sensex fell more than 1,000 points to end at 39,728 and the Nifty closed nearly 300 points lower at 11,680.

The correction was triggered by fading hopes of further stimulus in the US and reports of fresh lockdowns in Europe which added to weak sentiment across equities globally

Average market capitalisation of the BSE-listed companies fell Rs 3.3 lakh crore in a single session to Rs 157.24 lakh crore on October 15.

Sectorally, selling was seen in telecom, banks, energy, IT, as well as realty. The Bank Nifty slipped 802 points to close at 23,072.

Experts are of the view that the indices could see another 3-4 percent fall before things normalise.

"Crucial support for the Nifty is placed at 11,550-11,500. Any rallies could be used to go short, a market participant said.

Providing reasons for today's (October 15) crash, Gaurav Dua, SVP, Head Capital Market Strategy & Investments, Sharekhan by BNP Paribas, told Moneycontrol that weak global cues seems to have triggered profit booking in India too with banks & IT stocks facing intense selling pressure.

He sees scope for a three-to-four percent decline from current levels before things stabilise and markets find a durable short term bottom.

Dua advises investors to buy into weakness. "Our preferred picks are ICICI Bank, Infosys, and Cipla among index companies."

Here is what experts have to say on what investors should do on October 16:

The Nifty formed a Bearish Belt Hold candle with a long bearish body along with the same open and high levels, which indicates complete dominance by the bear. It formed a Bearish Engulfing pattern on the daily scale and the RSI indicator has given a negative crossover on the daily scale.

Now the immediate structure has changed and till it doesn’t cross and hold above 11,750 zones, weakness could be seen towards the next key support at 11,550-11,500 zones while on the upside hurdles are seen at 11,800 and 11,850 zones.

On the daily chart, the Nifty has formed a bearish outside bar along with an Engulfing bear candle. The index seems to have stepped into a consolidation phase that can last for the next few sessions.

On the downside, 11,500 is likely to act as a lower boundary for the consolidation whereas on the higher side, the psychological mark of 12,000 will continue to maintain pressure.

The break of 11,800 proved to be quite severe in intensity as the markets dropped 150 points from that level.

Traders are advised to maintain caution and not jump into long or short trades immediately. The resistance on the upside is at 12,000 and the support for the medium term is at 11,500.

5)  Also rumours among market participants of default by a broker.

The Bank Nifty erased the entire previous session gains to close at 23,000 level, which is over 1,000 points fall from the day's highest level.

The Nifty failed to follow continuation pattern and that triggered extreme weakness in the market. Nifty is heading towards 10500 on the minimum side.

On the higher side, 11,780/11,800 would be key hurdles and traders should look for selling short on the Nifty with a final stop loss at 11,850.