NIFTY Index Chart Analysis
Markets at peak, now RBI policy holds the key
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.