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Indian stock markets fell sharply on Friday, posting their worst week since November, as investors fretted that fast-paced interest rate hikes to fight surging inflation would slow global economic growth. The benchmark indexes also posted a fourth consecutive weekly fall, weighed down by a surprise interest rate hike by the Reserve Bank of India, foreign fund outflows and mixed corporate earnings results. The Sensex finished at 54835 on Friday. Nifty finished 1.63% lower at 16411. After a two week consolidation in a range, Nifty50 closed sharply lower forming a large bearish candle. The index is now trading close to the previous 16450 support. The short-term trend has turned bearish and it is likely that the markets will continue to fall. Looking at the bigger picture, since October 2021, the benchmark index has mainly been trading in a broader 16450-18350 range. Therefore, a bounce off current levels cannot be ruled out either. Against this backdrop, traders should avoid initiating new short positions at current levels. Traders can maintain a neutral to slightly negative bias and look for sell-on-rise opportunities. Immediate support and resistance are now at the 16300 and 16700 levels. Markets will react to the Reliance read in early trade on Monday and then move to the global signals. Reliance Industries Ltd, India's most valuable company, on Friday reported a 22.5% rise in fourth-quarter profit, helped by higher fuel demand and margins in its main energy business. Rising fears of aggressive US Federal Reserve rate hikes have unsettled investors around the world, including India. On the index front, the Nifty has tested the crucial 16350 support zone and signs suggest the prevailing decline will continue with a pause/recovery in between. In the event of a recovery, the 16650-16750 zone would act as a hurdle. Participants should adjust their positions accordingly and use the rebound to create shorts. Formation of a doji and an unfilled opening gap down signals the possibility of a minor bounce up from here or from the lows in the next 1-2 sessions. Any upside potential from here might face strong resistance around 16650 level. Eventually, Nifty could break off the low and near term support at 16250.
