The weekly dossier: A further rally or consolidation? Here#39;s what Dalal Street veterans expect

The Indian market ended the week on a positive note as the equity benchmarks Sensex and Nifty rose almost 3 percent week-on-week.

The bulls continued to dominate and helped the index to gain significantly. The surge was led by index heavyweight, Reliance Industries, which announced that it has become net debt-free.

Besides, the prevailing buoyancy in the banking and financial combined with up move in auto, realty and infra stocks further added to the positivity.

In the coming week, the market may continue to trade on an upward trajectory, with some intermittent volatility.

Let’s take a look at what the veterans of Dalal Street expect about the course of the market.

Analyst: Siddharth Khemka, Head – Retail Research, Motilal Oswal Financial Services

The analyst expects the market momentum to continue in the near-term on the back of changed sentiments and improved liquidity.

“Technically, Nifty can extend its move towards 10,350-10,500, if it manages to sustain above 10,000 mark. Apart from global cues and development around geopolitical tensions, the monthly F&O expiry would be some of the key monitorable. Traders can continue with positive bias while investors may wait for declines for long term buying opportunities,” said the analyst.

Analyst: Deepak Jasani, Head – Retail Research, HDFC Securities

The markets began the week on a negative note as fears of a second wave of COVID-19 infections sent jitters across global markets. Geopolitical tension between India and China also kept the markets in check.

However, the US Federal Reserve’s plans to purchase corporate bonds boosted investor sentiment across the globe. The Nifty ended the week 2.8 percent higher, almost completely recovering the previous week’s losses.

Nifty has picked upward momentum over the past two days. 10,329-10,458 is the next resistance band for the Nifty, while 10,149 is the support.

Analyst: Shrikant Chouhan, Executive Vice President – Equity Technical Research at Kotak Securities

On Friday, Nifty closed above the crucial resistance of 10,200 and Bank Nifty above the level of 21,300.

For the last three weeks, both the indices have been holding well above the bullish price gap.

“For stock market traders, I would like to give message over here that in bullish markets, never ignore bearish price gaps and in a bearish market, never ignore bullish price gaps. These price gaps are as important as the level of 7,500,” said the analyst.

With fresh higher and concrete support, Nifty would try to move beyond the level of 10,350. Above the level of 10,350, Nifty would retest the level of 10,550-10,600, which is coincidently earlier major support for the market in the year 2019 and 61.80 retracement level of the entire fall between 12,430 and 7,500.

“Our advice is to trade long above 10,350 for the limited upside up to 10,550-10,600. Review portfolio around 10,600 again and reduce weak long positions. On an immediate basis, 10,000 would act as a major support for the market and a close below the same would be negative for the market. Financials and technology stocks should be on the watch list along with telecom stocks,” said the analyst.

Dharmesh Shah, Head – Technical, ICICI direct

In the coming week, a decisive close above last two week’s high of 10,328 would trigger extended pullback towards 10,600 as it is confluence on 61.8 percent retracement of the entire decline of the year 2020 (12,430-7,511), 10,550.

As per the change of polarity concept, early March breakdown with a negative gap area near the year 2019 low of 10,585 would now act as key resistance. The 52 weeks EMA is placed at 10,635.

“India VIX failed to sustain at higher levels, indicating subdued volatility and continuation of risk-on sentiment. VIX has an inverse correlation with the Nifty. Thus we believe cool off in India VIX would act as a tailwind for directional move in the market,” said the analyst.

Both, Nifty midcap and small-cap indices resolved above last week’s high, indicating relative outperformance. This has resulted in an improvement in broader market participation which augurs well for extension of ongoing pullback.

Structurally, over the past two decades, it has been observed that post major correction of more than 40 percent (seen in 2000-01 and 2008) the index enters a volatile phase.

In both historical instances, after a first sharp pullback, (in CY01-02 it rallied 42 percent and in CY08-09 it rallied 44 percent) from major low, the index witnessed corrective phase.

“In the current scenario, the index would complete its 40 percent pullback in the vicinity of 10,500-10,600. We expect the index to maintain the same rhythm as observed in historical instances and enter the corrective phase in the coming weeks,” said the analyst.

Analyst: Arun Kumar, Market Strategist at Reliance Securities

The medium-term indicators are signalling positive trend. The option buildup is biased in favour of the bulls. The market internals of both the Nifty50 index and the broad NSE 500 Index are strong on the medium-term timeframe and slightly overbought on a near-term basis.

The long-term market internals of these indices bounced from the oversold zone and are attempting to move up towards the equilibrium zone. This implies that there is scope for the market to strengthen further. Combining all these factors, the market could extend its ongoing rally on a near-term basis.

The index may face some headwinds around the zone of 10,330 – 10,360. On clearing this hurdle decisively, the next zone to watch out will be in the region of 10,500 – 10,650.

“We are shifting the supports up close to 9,900 – 10,000. The private banks, commodity, NBFCs, media, metals and auto sectors display positive interest and may continue to be in the limelight, while FMCG, consumption and information technology stocks are out of favour amongst the long traders,” said the analyst.

Analyst: Vinod Nair, Head of Research at Geojit Financial Services

From a technical viewpoint, the momentum in the Nifty is likely to continue, considering the close above its 100-DMA, but external factors can impact this momentum heavily.

Any increase in tensions and indication of drying up of liquidity can have an immediate impact on the markets. Considering the volatility and the unknowns, this seems to be a sell-on-rise market and investors would do well to keep booking their profits.

Analyst: Jyoti Roy, DVP Equity Strategist, Angel Broking

“We believe that with no major events globally sentiments should be positive for Indian equities in the first half of the week and we expect Indian equities to continue outperforming US markets,” said the analyst.

Any breakthrough in the India China standoff would be a big positive for Indian equities. However volatility cannot be ruled out in the second half of the week as we head into expiry especially if there is an escalation to the India China standoff or a sharp increase in Covid-19 cases either in India or the US, the analyst said.

Analyst: Aditya Agarwala, Senior Technical Analyst – Institutional Equities, YES Securities

Nifty is approaching its previous pivot high of 10,330 which is also close to the 200-weekly moving average at 10,370.

A successful trade and close beyond this cluster of resistances between 10,330-10,360 will extend the upward journey taking the Nifty higher to levels of 10,550 which again will act as a stiff resistance zone being multiple Fibonacci retracement levels.

Moreover, if bulls manage to push the Index beyond 10,550 uptrends can stretch to levels of 10,730-10,810.  On the flip side if bears protect this crucial resistance zone of 10,550 then selling pressure will be triggered dragging it to levels of 10,350-10,000; below 10,000 it can slide to 9,800 as well.

Technical indicator RSI has also been making higher lows and recently it turned north from the neutral level of 54-55 suggesting a range shift in favor of the bulls.

Analyst: Ajit Mishra, VP – Research, Religare Broking

The recent up move indicates participations are hopeful of de-escalation of tension between India and China. Besides, the recent data of loan moratorium and gradual reopening of the economy have eased their concerns over the NPA crisis in the banking system.

“Going forward, in absence of any major event except the earnings season, the markets would continue to take cues from global markets. Further, developments on India-China feud at LAC would remain a key monitorable. Amid all, indications are in favour of further surge in the index so we advise aligning the positions accordingly,” said the analyst.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Moneycontrol Ready Reckoner

Now that payment deadlines have been relaxed due to COVID-19, the Moneycontrol Ready Reckoner will help keep your date with insurance premiums, tax-saving investments and EMIs, among others.

WEBINAR: Tune in to find out how term insurance can provide risk protection during tough times. Register Now!