Indian markets opened with a gap up following the upbeat mood in the Asian indices on hopes that the US Fed might cut rates at the conclusion of the FOMC meeting on Thursday. Reports of favorable US-China trade talks in the near future also added to the positive sentiment. However, domestic shares reversed gains around 11 am in the morning and in a one-way intraday slide touched the low in mid-afternoon trade led by heavy selling in Auto and Pharma stocks.
As we have predicted two days back after the big correction, Nifty is sideways with a downward bias. In my opinion, the fresh downside as we have predicted in our May Monthly outlook (click here) is only possible as and when Nifty closes below 11635 otherwise a small pullback is also possible. The US FED decision on Thursday is keenly watched by market participants globally and will be a big trigger for the market movement.
The nifty High-Low range for the day is 175 points giving ample opportunity for intraday traders to make hay while the sun shines. Wait for a Daily close below 11635 for a 300-400 points downside to open on the Nifty.
The Mid and Small Cap indices are underperforming the Nifty from the beginning of 2018. The relative underperformance has started making fresh lows again after the last few months sideways action.