Is market going lower, or is today's fall a healthy pullback? This is what professionals say

Is market going lower? For a third consecutive day, the benchmark indices slipped on Tuesday, with both the Sensex and Nifty losing more than 1 percent, due to profit booking in heavyweight stocks, selloff in global bonds and thoughts about a possible Covid resurgence.

Sensex dropped down by 872.98 points or 1.06 percent to close at 81,186.44. The market opened on strong positions but started drifting lower as the day wore on, hitting an intraday low of 81,153.70. Sectors like autos, financials and defence remained losers, with only three out of thirty Sensex constituents closing in the green.

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Nifty later fell under pressure, losing 261.55 points or 1.05 percent to finish at 24,683.90.

These gains now being followed by three losses in a row led to a key question in eyes of investors-whether this is a healthy correction after a strong run-up or is the market signalling a deeper correction ahead?

"There is a sharp decline amid domestic and global cues," said Devarsh Vakil, Head of Prime Research at HDFC Securities. "Markets were spooked by rising Covid-19 cases in Southeast Asian countries such as Singapore and Hong Kong. At the same time, bond yields have firmed up globally, especially in Japan, where a sell-off has driven borrowing costs higher. This is weighing on sentiment across the board," he said.

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Vakil said traders were watching the outcome of the trade discussions between India and the U.S. It added to the market uncertainty.

"Technically, Nifty has closed below its 5-day exponential moving average (EMA) for the first time since May 8. This suggests that traders may be shifting their stance from buying the dips to booking profits. Key support levels are now seen at 24,494 and 24,378, while resistance is expected in the 24,800 to 24,900 range," he said.

In line with a similar view, analysts at Bajaj Broking said that with a sizable bearish candle on the daily chart, the Nifty has formed a pattern of lower highs and lower lows, thus indicating a continuation of the correction phase.

"We expect the index to move into a consolidation zone between 24,400 and 25,200 in the near term. This would help cool off the overbought readings seen on the daily stochastic oscillator after the recent strong rally," Bajaj Broking said in a note.

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