Markets likely to see a dead cat bounce in next 2-3 days, says Rohit Srivastava

The market is an extremely oversold territory and a short-term bounce is very likely, Rohit Srivastava, founder of Indiacharts, has said.

“Today is the expiry day, so a lot of call writing which was done in the last three days will all expire. That will ease the pressure. You may see a bounce in the next two, three days but it will be a dead cat bounce, maybe 200-300 points,” Srivastava told Moneycontrol.

A “dead cat bounce” is used to define a brief and temporary recovery in the price of a declining asset, after a significant drop. This recovery is short-lived and doesn’t indicate a sustained reversal of the asset’s downward trend.

Over a longer term, the markets may have slipped from a bull market to a slightly bearish one for some time, especially because of the risk of a US recession hitting early next year, he said. US treasury yields around 5 percent also make the case weaker for equities and other asset classes.

Also Read: How will the surge in US bond yields rub-off on other asset classes?

“Markets have started making lower highs and are heading lower eventually. After two-three days of bounce, it will again go lower. We will probably see selling pressure pick up again, retest this 18,800 support. If it breaks 18,800, then it can possibly go down to 18,100,” he said.

When it comes to sectors, Srivastava and his team are not taking bullish stance on any, given the setup.

Advice to traders?

According to him, traders should not short at the moment as a bounce is around the corner. “But after the pullback, it will be a sell-on-rise market largely,” Srivastava said. “The Nifty back above 20,000 looks unlikely this calendar year,” he added.

Also Read: Markets not in a free fall, says this expert; pegs for banks, real estate stocks

At 12.47 pm, the Sensex was down 1.27 percent at 63,236.75, and the Nifty was down 1.27 percent at 18,879.40. About 605 shares had advanced, 2,500 declined and 85 were unchanged.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.