The panic continued on the bourses last week. Fresh negative news on housing finance companies and continuing stress on IL&FS and Yes Bank continued to impact the market sentiment.
The FIIs remained net sellers in the cash segment but were marginal net buyers in the derivatives segment. However, the DIIs continued to support the markets at the lower levels by remaining net buyers but they, too, were occasional sellers. The breadth of the market remained negative amidst low volumes.
On the global front, USA and China imposed fresh tariffs on each other. On the domestic front, the government planned to impose disaster cess on luxury goods, cigarettes and a few other items. Investors will closely watch the forthcoming RBI policy. The Street expects a 25-50 bps rate hike and a reduction in cash reserve ratio (CRR). Technically, the prevailing negative technical conditions weighed on the market sentiment. The Stochastic, MACD,
KST and RSI are all placed below their respective averages on the daily and weekly charts. The Nifty has slipped below its 50-day SMA and 100-day SMA. These negative technical conditions could lead to intermediate bouts of selling pressure especially at the higher levels.
The prevailing positive technical conditions, however, still hold good. The Nifty is placed above its 200-day SMA, which is its long-term average. The Nifty’s 50-day SMA is placed above its 100-day SMA and 200-day SMA and its 100-day SMA is placed above its 200-day SMA indicating a ‘golden cross’ breakout. These positive technical conditions could lead to buying support at the lower levels.
The -DI line is placed above the +DI line and is placed above 35. But it has come off its recent highs, which indicates that the sellers are covering their shorts at the lower levels. The ADX line is placed above 27. The Nifty has closed below 11000, which is a negative sign for the markets. It is important that the Nifty moves and sustains above 11000 for selling pressure to ease. If it fails to do so, then a further downslide is likely and it could test its 200-
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day SMA placed at 10770.
The market sentiment remains nervous. Any positive action by the government on the IL&FS matter could improve the market sentiment. Meanwhile, the markets will take cues from the forthcoming RBI policy, global markets, Dollar-Rupee exchange rate and crude oil prices. Technically, the Sensex faces resistance at the 36350, 37165, 37630, 38250, 38761 and 38989 levels and seeks support at the 35322, 34937, 34344 and 32596 levels. The resistance levels for the Nifty are placed at 111342, 11431, 11515, 11537, 11603 and 11761 while its support levels are placed at 11000, 10936, 10808, 10748, 10589 and 10419.