NIFTY In­dex Chart Anal­y­sis

Mar­kets at peak, now RBI policy holds the key

Dalal Street Investment Journal - - EQUITY TECHNICALS -

Nifty hit an all-time high yet again, mov­ing to­wards its fifth con­sec­u­tive pos­i­tive week. Apart from Fed­eral Re­serve main­tain­ing sta­tus quo on in­ter­est rate for now amid de­pre­ci­at­ing dol­lar and lower in­fla­tion, strong domestic cues kept the mar­ket op­ti­mism in­tact. Ex­u­ber­ant auto sales num­bers, where not a sin­gle auto com­pany posted a de-growth dur­ing the first quar­ter of FY18, buoyed the mar­kets. The econ­omy achieved a fis­cal deficit of 80.8% in the first quar­ter of FY18. How­ever, the out­put of core sec­tors slowed down to 0.4% in June, with in­fra sec­tor growth slow­ing down to 19-month low. More­over, bet­ter-than-ex­pected cor­po­rate re­sults—despite GST im­ple­men­ta­tion—have re­strained cor­rec­tion in the mar­kets so far. Re­cently, RBI on August 02 has an­nounced 25 bps cut in both repo rate and re­verse repo rate to 6% and 5.75% re­spec­tively, which is also dis­counted in the mar­kets.

Con­sid­er­ing the daily time frame, Nifty, after tak­ing cru­cial sup­port at the 9945 level, has bounced back with a bang to hit three con­sec­u­tive pos­i­tive clo­sures. Thereby, Nifty broke its prior all-time high of 10115 made on July 27 and made a new high of 10137. In Tuesday's can­dle also, Nifty re­mained volatile and tried to re­treat up to 38.2% re­trace­ment level of the three-day rally and bounced back to close in the green with ris­ing vol­umes. How­ever, the broader mar­kets are lack­ing mo­men­tum and the daily moves are driven by hand­ful of stocks that trig­ger news-based ex­treme up­side mo­men­tum. The next 15-20 days would be driven by stock-spe­cific move­ments amid on­go­ing cor­po­rate re­sults and an­nounce­ments. Go­ing for­ward, we may see Nifty con­sol­i­dat­ing at high lev­els or go­ing into cor­rec­tion mode next week. In case Nifty con­tin­ues to hit all-time highs in a slug­gish man­ner, we hold 10150-10300 as the next re­sis­tance lev­els. On the con­trary, in case mar­kets re­treat from here, we hold 10050-10015 as im­me­di­ate sup­ports.

On the weekly time frame, Nifty is in the midst of its fifth con­sec­u­tive rally, that too in the over­bought zone, with no im­me­di­ate sig­nal of a fall. On a monthly ba­sis, after 5 con­sec­u­tive ral­lies, Nifty wit­nessed a breather in June and started off with yet an­other pos­i­tive rally from July. Hence, the August month looks pos­i­tive, though we may see some cor­rec­tion after the cur­rent week. If not, then we may see the rally con­tin­u­ing for cou­ple of weeks more on a clos­ing ba­sis. In case of cor­rec­tion, we hold 9970-9945 as the im­me­di­ate sup­port level, fol­lowed by 9870-9790. How­ever, if the rally con­tin­ues, we hold 10500-10700 as the re­sis­tance lev­els above 10300.

The mar­kets are hit­ting highs, but the stocks are highly volatile. Hence, we sug­gest in­vestors to main­tain tar­gets and stop losses strictly and act ac­cord­ingly. In­vestors can add smaller quan­ti­ties at ev­ery dip in the stocks that have hit their peaks along with the mar­kets.

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