Nifty back above 12,000 but is the worst over?

After falling for two days, Indian markets rebounded on January 7, pushing the Nifty above 12,000 as the US-Iran tensions didn’t inflame further which eased crude prices and strengthened the rupee.

The Sensex rallied by about 200 points, while the Nifty gained 50 points to close above 12,050 levels.

The rupee was stronger after it rose around 71.7275 against the dollar.

Oil surrendered hefty gains and was trading around $ 68/bbl, Reuters data showed.

Let’s look at the final tally on D-Street: the Sensex rose 192 points to 40,869, while the Nifty closed 59 points higher at 12,052.

Sectorally, the action was seen in realty, energy, finance, metals, and healthcare stocks. Profit-taking was seen in telecom, IT, consumer durables, and public sector indices.

Broader markets outperformed, as the BSE Midcap index was up 0.65 percent, while the S&P BSE Smallcap index gained nearly 1 percent.

Is the worst over?

The Nifty did manage to reclaim 12,000 levels on a closing basis but faced pressure at higher levels. The index fell 100 points from its intraday high of 12,152.

A 100-point drop from the high does suggest pressure at higher levels. At best, traders can still stay cautious and the bull momentum will resume once the index manages to close past 12,200.

Experts suggest a sell on the rise strategy, as the upside seems capped as the stability in crude prices and currency seems to have provided temporary relief to investors.

“In the near term, traders should have a sell-on-rise approach for the Nifty. The uptrend has been fractured in the near term; 12,100 is likely to remain as resistance zone on a closing basis,” Amit Shah, Technical Research Analyst, Indiabulls Ventures Ltd, told Moneycontrol.

The Bank Nifty, too, wiped most of the intraday gains. Below 31,900, the Bank Nifty is in a near-term weaker zone. Recoveries are unlikely to sustain as the trend has been fractured.

“We expect pressure on the index to continue in the near term. Lower support zones, as mentioned, are likely to get tested on the downside; 31,750-31,900 zone is likely to act as stiff resistance on the way up,” said Shah.

Stocks & Sectors

Sectorally, the BSE Realty index was up 1.8 percent, the BSE Energy index 1.02 percent and the Metal index was up 0.66 percent.

A volume spike of 100-300% was seen in stocks such as Biocon, Bharti Infratel, UPL, NMDC, and Ramco Cements

Top Nifty gainers – UltraTech Cements, Zee Entertainment, and Vedanta

Top Nifty losers – Infosys, BPCL, Bharti Infratel

Long Buildup – Canara Bank, MindTree, RBL Bank, NIIT Tech

Short Buildup – Biocon, NMDC, BPCL, HPCL

Stocks in news

Hindustan Construction Company share price gained 4 percent after its joint venture company received orders from the Delhi Metro.

The share price of telecom equipment maker ITI rallied 13 percent after the state-owned company reported impressive numbers for the quarter ended December 2019.

GM Breweries fell over 4 percent after the spirit maker reported a 16.3 percent YoY decline in the third-quarter net profit, dented by lower revenue and operating income.

Technical View

The Nifty made a bullish candle, which resembled an Inside Bar pattern on the daily charts.

It bounced back after retesting its 50-day exponential moving average (EMA) placed at 11980, and 50-DMA at 12023.

For the time, the Nifty appears to be defending its 50-day EMA, whose value is placed at around 11,980. 

The consolidation process can be expected to continue as long as the Nifty sustains above the said average and weakness shall resume on a decisive close below 11,974.

Traders are advised to remain neutral till a directional move emerges in either of the directions, say experts.

Traders should remain neutral on the long side. Fresh shorting should be considered on a close below 11,980 levels with targets close to 11830, they say.

Three levels: 12,005, 12,152, 12,200Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.