WHAT LIES AHEAD : NEAR-TERM PICTURE
The jump in country’s ease of doing business by 23 places to the 77th rank cheered the domestic investors, who are now hoping continuation of the BJP’s reign for the next 5 years. Indian benchmark index Nifty witnessed some bounce-back from its crucial support level of 10,000 amid encouraging corporate earnings reports during the last five trading sessions.
Further, correction in crude oil prices and, thereby, the bounce-back in rupee too buoyed the market sentiments, resulting in bottomfishing in few stocks. The broader market indices outperformed the benchmark indices, with the
Mid-cap and Small-cap indices surging 6.4% and 5.5%, respectively, as against 2%-plus in both Nifty and Sensex. On the sectoral front, the realty sector led from the front with 6.7% gains, while FMCG and metal sectors remained flat.
Technically, Nifty after registering a low of 10,004.55 as on October 26, 2018, has witnessed a smart pull-back rally, where it has witnessed about 61.8 per cent retracement of the recent fall which started on October 17, 2018, from the high of 10,710 to the low of 10,004.55. Going ahead, to continue this pull-back rally, Nifty will have to move past and stay above the 10,400-10,450 zones. The region of 10,400-10,450 is a crucial resistance for the bulls as it is confluence of 61.8 per cent retracement of the last leg of fall from the high of 10,710 to the low of 10,004.55, and the opening downside gap which was formed on October 19 is placed in this region and the downward sloping trendline adjoining the levela of 11,145.55-10,710 is placed in this area. Until the zones of 10,400-10,450 are breached and the Nifty sustains above that, the vulnerability of the index from volatile bouts of sell-offs will remain. However, a close above the 10,400-10,450 region would set the stage for the next leg of the upmove, where the Nifty may attempt to touch the level of 10,540, followed by the major hurdle which is placed in the region of 10,675-10,765 as it is the confluence of October 17 swing high of 10,710 and 38.2 per cent retracement of the major correction which begin in the last week of August from the high of 11,760 and the 200-DMA is placed in this region. On the downside, immediate support is seen around the level of 10,270, followed by 10,180. The 14-period RSI on the daily chart is quoting around the 45 mark and it has recently marked a fresh 14-period high, which is bullish. The daily MACD is trading above its signal line. Overall, the bulls, during this high volatility and corrective decline, have managed to defend their major support zone of 9950-10,020 and having done this now, they need to move past 10,400-10,450 zone and stay above this zone to confirm a temporary bottom formation. LEGEND : EMA – Exponential Moving Average. MACD – Moving Average Convergence Divergence RSI – Relative Strength Index