NIFTY In­dex Chart Anal­y­sis

Nifty may see some short-cov­er­ing

Dalal Street Investment Journal - - TECHNICALS | EQUITY -

In­dian stock mar­kets bounced back af­ter hit­ting ma­jor sup­port lev­els, driven by ro­bust macroe­co­nomic num­bers and slightly down­wardti­tled in­fla­tion, which has cre­ated hopes for mone­tary eas­ing in the forth­com­ing com­ing RBI pol­icy. Fur­ther, cor­po­rate earn­ings sea­son seem to be buoy­ant as In­dian stock mar­kets have sus­tained their high lev­els with in­tra-day volatil­ity since the break­out on Oc­to­ber 16, 2017. Mar­kets wit­nessed con­sol­i­da­tion at higher lev­els, but yet again broke out in the re­cent ses­sion with the spurt in bank­ing stocks af­ter the Cen­tral govern­ment an­nounced re­cap­i­tal­i­sa­tion of PSU banks to the tune of ₹2.11 lakh crore. Con­sid­er­ing the global bourses, strong quar­terly re­sults in the US too helped mar­kets scale new highs. Go­ing for­ward, the reap­point­ment of Shinzo Abe as Ja­panese Prime Min­is­ter may bring in some pres­sure on the US and other na­tions, with more ag­gres­sive stance ex­pected from Abe to­wards Py­ongyang ow­ing to es­ca­lat­ing ten­sions be­tween North Korea and the US.

Also, whether the mar­kets would re­main on an up­ward course or cor­rect from here is now the mat­ter of con­cern. The stocks have been ris­ing with re­cov­ery in earn­ings, but with pre­mium val­u­a­tions, while the econ­omy has been wit­ness­ing grad­ual de­cel­er­a­tion. The idle cash post de­mon­eti­sa­tion has been brought into the sys­tem again, while the FIIS have been

pulling out money since the GST roll-out.

Tech­ni­cally, the ma­jor In­dian bench­mark in­dex Nifty had bro­ken out of its ma­jor re­sis­tance at 10140-10180 lev­els on Oc­to­ber 16 on a clos­ing ba­sis. There­after, Nifty con­sol­i­dated for five ses­sions and yet again wit­nessed a break­out with a ga­pup open­ing on Oc­to­ber 25, hit­ting a high of 10340. Go­ing for­ward, Nifty may con­tinue to go up from the cur­rent lev­els or may cor­rect up to 10180-10120 for a fur­ther bounce back. In that case, we hold 10340-10380 as the im­me­di­ate re­sis­tance lev­els. On the down­side, the lev­els of 10230 fol­lowed by 10180 would act as im­me­di­ate sup­ports. Con­sid­er­ing the trend main­tained by the mar­kets with jus­ti­fi­able vol­umes and the 14-pe­riod RSI at 66 de­pict­ing mo­men­tum, we hold 10550-10650 as the next ma­jor re­sis­tances above 10350. We are at the midst of earn­ings sea­son and any de-growth in re­sults of front­line com­pa­nies may bring in cor­rec­tion in the mar­kets. In which case, be­low 10120, we hold 10100-10070 as sup­ports in the medium term.

The In­dian Volatil­ity In­dex (VIX), a gauge for mar­ket’s short term ex­pec­ta­tion of volatil­ity, inched up 1.75% and reached 11.79. Nifty Novem­ber Fu­tures closed at 10,325 on Wed­nes­day at a pre­mium of 30.85 points over spot clos­ing of 10,294.15. Nifty Novem­ber fu­tures added 44.68% in open in­ter­est. The Nifty Put Call Ra­tio (PCR) was at 1.21 for Novem­ber month con­tract.

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