By Ajit Mishra
Markets remained volatile for yet another week but managed to end in the green. The beginning was downbeat, tracking feeble global cues but the situation improved in the following sessions with stability in the world indices. However, pressure in the IT majors combined with the prevailing underperformance of the banking pack continues to weigh on the sentiment. Eventually, both the benchmark indices, Nifty and Sensex, settled with modest gains to close at 19,751.05 and 66,282.74 levels. Meanwhile, buoyancy in select key sectors like auto, FMCG, energy and realty kept the traders occupied. Besides, the positive tone on broader indices further eased the pressure.
Apart from earnings, global cues would continue to play a critical role in setting the direction of our markets. Among the key indices, the US benchmark, the Dow Jones Industrial Average (DJIA), tested a hurdle at 33,800 and couldn’t surpass it. We need a decisive break above 34,200 for a steady recovery else the decline would resume.
Nifty is currently hovering around the short term average (20 EMA) but facing stiff resistance due to lack of participation from two key sectors viz. IT and banking. We doubt that it could make a meaningful recovery without their contribution as they combined hold nearly 50% weight in the index. At the same time, other sectors like auto, energy, pharma, realty and metal are showing resilience so traders should align their trades accordingly. Also, we suggest keeping a check on position size and overnight risk management as volatility will remain high.
Here are the key levels to watch out for in both the Nifty and Banking Index along with a list of stocks, which can be considered for trading positions based on the market sentiment.
Nifty (CMP: 19,731.75)
A decisive close above 19,850 in Nifty could prompt further recovery towards 20,050 or higher. On the flip side, a decline below 19,500 would again change the bias on the negative side and push the index to 19,200 i.e. the lower band of the broadening formation.
Bank Nifty (CMP: 44,225.90)
The banking index has been continuing its underperformance due to the underperformance of the private banking majors. A break below 43,900 could trigger the next leg of the down move towards the major support zone of long term moving average i.e. 200 EMA, which currently lies around 43,200. In case of a recovery, we need sustainability above 44,700 to change the tone.
Stocks to Watch
Bullish- AB Capital, Bajajfinsv, Colpal, Deepakfert, Godrejprop, IGL, ITC, Havells, Hero Motocorp, Mothersumi, Tata Steel
Bearish- Asian Paints, Delta Corp, Kotak Bank, M&M Fin, Zeel
(Ajit Mishra, SVP- Technical Research, Religare Broking. Views expressed are author’s own. Please consult your financial advisor before investing.)
