It is a sea of red all over the equity markets. The Dow Jones Industrial Average (32,997.97) tumbled over 3 per cent yesterday. The Asian markets followed it and are trading sharply down. Barring the Nikkei 225 (27,027, up 0.78 per cent) other major indices are trading sharply lower. Shanghai Composite (2,997), Hang Seng (20.051) and Kospi (2,645) are down in the range of 1.2-3.6 per cent.

Taking cues from the sell-off in the global equities, India’s Sensex and Nifty 50 opened with a wide gap-down and have tumbled over 1.8 per cent each. Sensex at 54,656 is down 1.87 per cent. Nifty is down 1.92 per cent and is trading at 16,361. Nifty has support at current levels. As such there can be an intraday bounce if that holds. So, traders will have to be cautious in taking fresh short positions at current levels. Rather they should use rallies to go short.

Futures: The Nifty 50 May (16,375) Futures contract has tumbled 1.92 per cent. There is some support at 16,350. A strong break below 16,350 will drag the contract down to 16,200 and 16,000. But this may or may not happen today. There is a possibility of seeing a bouce from 16,350. Resistance is at 16,550. This can cap the upside if a bounce is seen from here.

Considering the overall weakness in the market, we don’t prefer to go long at current levels even if a bounce happens. At the same time, considering the risk-reward, fresh shorts are also not looking favourable at current levels. Traders will have to wait for a rise and then consider taking short positions. For now, we prefer to stay out of the market for today. We can look to take fresh short positions next week.

Trading strategy: Stay out of the market for now. Wait for rallies to take fresh short positions.

Supports: 16,350 and 16,200.

Resistances: 16,550 and 16,700.