Market at crossroads
Although the markets touched new historic highs last week, they finally corrected after failing to move above the 10500 mark. The Nifty fell just 10 points short of the magical figure. Weak global cues along with prevailing overbought conditions led to a market correction.
Once again, the FIIs turned net sellers in the cash and derivatives segment. However, the DIIs turned buyers again and were seen supporting the markets during the week. The breadth of the market remained weak amidst low volumes. The earnings season has largely been in line with expectations. Crude oil prices inched higher on fresh conflicts building between UAE, Libya and Iran. Global markets, too, remained jittery due to the Gulf crisis. Technically, the prevailing negative technical conditions weighed on the market sentiment leading to selling pressure.
The MACD, Stochastic, KST and RSI are all placed below their respective averages on the daily and weekly charts. Further, the Stochastic is placed in the overbought zone on the weekly chart. These negative technical conditions could lead to bouts of profit-booking and selling pressure especially at higher levels.
The prevailing positive technical conditions, however, still hold good. The Stochastic is placed in the oversold zone on the daily chart. Moreover, the Nifty is placed above its 50-day SMA, 100day SMA and 200-day SMA. The Nifty’s 50-day SMA is placed above its 100-day and 200-day SMA, its 100-day SMA is placed above its 200-day SMA indicating a ‘golden cross’ breakout. These positive technical conditions could lead to regular buying support.
The ADX line, +DI line and –DI line are all at crossroads and a breakout is awaited in either of them indicating a volatile and choppy trend till some clarity emerges. The Nifty has settled below the 10400 mark, which does not augur well for the market sentiment. It is important for the Nifty to move and sustain above this level for fresh buying to emerge and to test the 10500 mark. If the Nifty fails to do so, then selling pressure is likely to continue and it could test the 10124 level, which is an important support level followed by 9955.
The market is nervous due to the geopolitical events in the
Gulf, which led to a sharp spike in crude oil prices. Crude oil price beyond $66-68/barrel is likely to have a negative impact on the Indian economy. With the earnings season coming to an end with no negative surprises, the markets will keenly watch the turn of events in the Gulf and Korean peninsula. The government continued to reduce GST rates.
In the meanwhile, the markets could take cues from the earnings season, geopolitical news flow, global markets, Dollar-Rupee exchange rate and crude oil prices. Technically, the Sensex faces resistance at the 33750, 34000 and 34500 levels and seeks support at the 33300, 33000, 32325, 32000, 31610, 30921, 30680 and 29365 levels.
The resistance levels for the Nifty are placed at 10325, 10400, 10462, 10500 and 10575 while its support levels are placed at 10270, 10200, 10138, 10100, 10000 and 9955.