The Nifty on Monday broke its 200 daily moving average (200 DMA) in a sign of continued weakness in the Indian stock markets.

Markets are showing signs of weakness and when stocks like HDFC fall, it's a sign that foreign funds are selling as the stock is heavily owned by foreign funds. A fall in blue chips like Axis Bank could also signal a fresh round of selling by foreign funds who have very high ownership of the stock.

As a market we have now turned negative for 2015, even as global markets continue to rally sharply. When the 200 DMA breaks so convincingly and in such a short span of time, it's a sign that markets are headed lower. Then next support level for the Nifty could be the 8063 levels and a fall below that means the markets are headed to the 7900 levels.

Analysts say that the entire Minimum Alternative Tax issue has spooked foreign investors. On Monday FIIs sold a huge quantity in the cash market in excess of 1749 crores. This quantity is pretty sizeable ad despite the huge buying by domestic institutions to the tune of Rs 1667 crores, it could not stem the downside in the market.

Should you invest at the current levels?

Blue chip stocks are nowhere near their 52 week lows and are still trading at very high price to earnings multiples. For example, HDFC Bank which is currently traded at Rs 1002, has a 52-week low of Rs 711 and a 52-week high of Rs 1109. It is still nowhere near its 52 week low. Ditto for other blue chip stocks like L&T, Hindustan Unilever etc.

Analysts have always warned not to catch a falling knife. That is true. Let the market settle down and then one can look at good buying opportunities. It looks like we are headed lower and so one needs to wait and watch, at least till the corporate results pan out.

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