By Ajit Mishra
Markets plunged sharply lower in the passing week and ended the 3-month long consolidation phase. All sectors felt the heat wherein metal, realty and financials were among the top losers. The broader indices too witnessed pressure and lost in the range of 2%-3%.
Apart from the domestic factors, continuous weakness on the global front is weighing on the sentiment. Among the major markets, the US markets have been declining for the last 3 months and there is no sign of reversal yet. Though the existence of support around 32,500 may prompt some rebound, sustainability seems difficult to multiple hurdles around the 33,200-33,500 zone. On the flip side, 31,600 would be the next major support, in case of a breakdown.
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Given the prevailing volatile scenario, we suggest planning positions according to the key support and resistance zone, which we have highlighted for both the Nifty and Banking Index. Among the key sectors, banking still looks weakest while select stocks from the auto, realty, FMCG and pharma are still holding strong. Since choppiness is high on the broader front, traders should prefer index majors, with a focus on shorting opportunities on the rise.
Nifty (CMP: 19,140.90)
Nifty has ended the 3-month long consolidation phase and tested the long-term moving average (200 EMA) after six months. It has already retraced ~7% from its record high but a breakdown below 18,800 could trigger the next leg of a slide to 18,200-18,500 zone. In case of a rebound, the hurdle around the 19,200-19,500 zone would cap the upside.
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Bank Nifty (CMP: 43,039.15)
The banking index slipped below the long term moving average(200 EMA), in continuation to its prevailing underperformance, mainly from the private banking majors. We expect any rebound towards the 43400-43800 zone to act as a strong hurdle and participants should look for shorting opportunities on the rise. On the downside, the 41500-41900 zone may offer some support.
Stocks to Watch
Bullish- Balkrisind, Canfinhomes, HCL Tech, Heromotoco, Lichsgfin, MFSL, Oberiorlty, Persistent, Ramcocem
Bearish- ACC, Britannia, Dixon, IEX, Marico, UPL
(Ajit Mishra, SVP- Technical Research, Religare Broking. Views expressed are author’s own. Please consult your financial advisor before investing.)
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Consecutive days of upcloses brought cheer to Bank Nifty traders, an event that has occurred for the first time since hitting record peak in September. Yet, we are yet to clear the congestion resistances of the last fortnight. This along with the 50DMA at 44,760 presents a very formidable hurdle for bank nifty. This forces us to continue with a cautious approach, rather than embarking on an outright recovery play. But, given the three day ascent seen in MACD forest, and the oversold territory from which the index is coming off, there is still a reasonable window to pick upswings, but prospects appear limited as long as the 50DMA stays above.
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