11,200 Mark Critical As Index Breaks Down Below Key Support Levels On The Back Of Negative Newsflow

The bellwether index underwent a sharp correction last week, cracking below key support levels with disturbing ferocity. Friday's session was particularly brutal, with the index cracking more than 100 points.

The key driver of the fall was Friday's MPC meet, in which the RBI announced a significant downward revision in GDP growth estimates from 6.9 percent to 6.1 percent. The MPC however gave the bold guidance that “policy will remain accommodative as long as it is necessary to revive growth”, underscoring the central bank's commitment towards boosting flagging economic growth.

The consumer confidence survey showed weak consumer sentiment and tepid consumption demand, especially relating to non-essential items. This further dampened the animal spirits awoken by the recent tax cut announcement.

In the short run, the current level of 11,200 remains a critical one. This marks the 20 DMA mark, at which the index found support last week. If the index finds its feet at these levels in this truncated trading week, we're likely to witness a resumption of the bullish movement towards the 12,125 mark. Most likely, the bipolar behaviour of the equity markets is expected to continue for a little bit longer, but the broader trend hasn't turned bearish yet, despite last week's correction.

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