Earnings and global cues will influence sentiment
The domestic markets started on a positive note last week. The
Nifty crossed 10900 touching an intra-day high of 10923 but it failed to test the resistance level of 10942. Weak global market cues due to China’s poor PMI numbers and lower monthly GST collections in India spooked the market. The markets failed to offer any resilience on the back of sustained bouts of selling pressure and profit-booking. Buying support remained dismal. The breadth of the market remained neutral amidst high volumes. The FIIs turned net sellers in the cash segment but remained net buyers in the derivatives segment. The DIIs, however, turned net buyers once again and were seen supporting the markets at the lower levels.
On the domestic front, the GST collection remained tepid and it looks difficult for GST revenues to increase immediately due to the recent rate cuts. Monthly auto numbers released also missed estimates. Crude oil prices remained subdued amidst concerns about the global economy and high inventory. The US markets, too, remained weak after Apple Inc issued a warning that it will badly miss its quarterly sales forecast on the back of weakening growth and trade tensions in China. Peoples Bank of China reduced its bank reserve ratio by 100 bps to improve liquidity conditions and boost demand after the disaster PMI numbers. More central banks could follow suit to arrest the fall in economic growth. Technically, the prevailing negative technical conditions weighed on the market sentiment. The Stochastic, KST and RSI are all placed below their respective averages on the daily and weekly charts. The MACD is placed below it average on the daily chart. Further, the Nifty is placed below its 100-day SMA and 200-day SMA. Moreover, the Nifty’s 50-day SMA is also placed below its 100-day SMA and 200-day SMA, signaling a ‘Death Cross’ breakdown. All these negative technical conditions could lead to profit-booking and selling pressure, especially at the higher levels.
The prevailing positive technical conditions, however, still hold good. The Stochastic is near the oversold territory on the daily chart. Further, the Nifty is still placed above its 50-day SMA. These positive technical conditions could lead to short-covering
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and buying support at the lower levels.
The -DI line is placed above the +DI line and above 33, which indicates that the sellers are gaining strength. The ADX line is still languishing around 14, which indicates that the markets lack a secular trend and the current trend has no strength. The Nifty has failed to sustain above the 10756 level, which does not augur well for the markets. The Nifty needs to sustain above 10756 for selling pressure to ease and to rise further to test the 10843 level. If the Nifty sustains below 10756, then it could slip further to test the support range of 10625-10589.
The market sentiment remains tentative and nervous ahead of the forthcoming earnings season. Positive news flow and regular buying support at the higher levels is needed for the markets to move higher. Stock-specific action is likely to continue. Meanwhile, the markets will take cues from the allocation by FIIs, earnings season, Dollar-Rupee exchange rate, global markets and crude oil prices. Technically, the Sensex faces resistance at the 36350, 36602, 37165, 37490 and 38125 levels and seeks support at the 35606, 35400, 35187, 34748, 34344, 33723 and 33349 levels. The resistance levels for the Nifty are placed at 10756, 10843, 10942, 11008, 11146 and 11350 while its support levels are placed at 10710, 10625, 10589 and 10534.