Will market consolidate or take a leap forward? what market experts have to say

Even though the market logged gains in the week gone by, signs of caution were clear as the market rose and corrected in tandem.

Markets consolidated in a range amid mixed cues. Subdued global markets weighed on the sentiment, however, recovery in select index majors in the last two sessions triggered a sharp rebound.

The S&P BSE Sensex rose 1.3 percent while the Nifty50 gained 1.1 percent for the week ended September 11. The braader markets, however, were down.  The S&P BSE smallcap index fell 0.3 percent and the midcap index slipped 1.07 percent.

The strong performance from Nifty heavyweight, Reliance Industries, combined with favourable news of steps towards disengagement between India and China at the Line of Actual Control (LAC) aided some relief. However, underperformance from the banking pack capped the upside in the benchmark.

Will the trend of consolidation continue or the market will try to leap further? Top analysts share their view:

Ajit Mishra, VP – Research, Religare Broking

Among the major triggers, participants will first react to the IIP numbers followed by the CPI and WPI inflation data in the coming sessions.

Further updates on disengagement between India and China at LAC will be on their radar as well and markets will continue to take cues from global indices and upcoming FOMC meet.

Indications are in the favour of further consolidation in the Nifty and the probable range could be 11,100-11,600.

We may see some recovery in the banking pack but traders should limit their positions mainly to the sectors that are seeing buying interest.

Siddharth Khemka, Head – Retail Research, MOFSL

The market is likely to consolidate in the near-term with a positive bias, as the global cues have turned weak and even FIIs have turned sellers.

Even the Nifty valuation at 21 times 1-year forward P/E does not look as lucrative as it was a few months back.

Midcap and smallcap companies have been relative outperformers in the calendar year 2020 and the momentum may continue in the near-term, especially after the Sebi mandated multi-cap funds to invest 25 percent each in small and mid and largecaps.

Thus any weakness in the market should be looked at as a buying opportunity to add quality stocks in the portfolio, as the overall long-term market trend remains positive.

Next week, investors will track Fed monetary policy meet along with developments over India-China border issues, news flows around COVID vaccine trials and global cues.

Shrikant Chouhan, Executive Vice President, Equity Technical Research, Kotak Securities

Our market followed the trend of the Asian markets. Such a market is called a cautious market and the main reason for it is the elections to be held in November 2020.

The US market has been volatile for the past few days and buying over the weekend is bound to lead to a crisis.

That is why our market was nominally up and the buying trend was seen in the defensive sectors like FMCG and technology.

If the Nifty breaks the 11,500, it is likely to move to 11,700 or 11,800. The level of 11,300 will serve as crucial support.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities

The Nifty shifted into a narrow range on September 11 after showing a sharp up-move and closed the day higher by 15 points. A small body of positive candle was formed with upper and lower shadow. Technically, this pattern could indicate the formation of a high wave-type candle pattern.

Normally, such a high-wave pattern immediately after a reasonable move could signal a possibility of profit-booking from the highs. A decline in the next session could confirm the reversal pattern.

The opening downside gap of September 4 is acting as a key overhead resistance of Nifty around 11,500 levels.

Though, the market moved above 20-day EMA at 11,410, the uptrend line is still acting as a hurdle at 11,520 as per the concept of change in polarity. Hence, a sustainable move above 11,550 levels could open a renewed buying enthusiasm in the market.

On the weekly chart, the Nify formed a small positive candle with a minor lower shadow, after the formation of a significant bearish engulfing pattern in last week. Normally, such immediate bounce backs are rare post bearish pattern, but the upmove till 11,550-11,600 can’t be ruled out before showing another round of declines from high in the next session.

The upside bounce of the September 10 session held with range bound action the next day. Any upside attempt is limited up to 11,500-11,600 levels for the next week, but there is a higher chance of selling pressure emerging from the highs. Until the 11,600 level is crossed decisively, the near-term bearish trend and the initial downside target of 11,000 remains intact.

Nirali Shah, Senior Research Analyst, Samco Securities

The Nifty, after posting a bearish engulfing pattern the previous week, traded in a narrow range this week.

The benchmark index is still trading in an overbought zone on a weekly time frame and we maintain a bearish outlook going ahead expecting the index to retest the lower end of the channel drawn from March lows on the weekly chart.

Immediate support and resistances are now placed at 11,180 and 11,590 respectively.

Globally, markets are expected to remain observant and may react and adapt to announcements from the US presidential campaigns. All eyes are on the US presidential election which can dictate the course going ahead.

Given no major occurrence in domestic markets, markets would be majorly driven by heavyweights. RIL is one example that is experiencing a second wave of fundraising and this could keep the sentiment positive in the coming weeks.

Markets may take comfort from subdued crude prices, economies opening up, consolidation of gold among a few other factors but it would be prudent to remain cautious as there is a high probability of a correction.

Vinod Nair, Head of Research, Geojit Financial Services

With the lack of any official statements from the high-level talks to defuse border tensions, investors need to be prepared for a slow progress in this regard.

This uncertainty will keep worrying markets for the short term. The lack of any fresh domestic triggers will mean that investors will continue to watch global cues for any directional trend.

Many small-cap companies are declaring their results over the weekend. Stock-specific moves can be expected.