Global stocks, US economy to dictate further market cues; Nifty should hold 17,700 for recovery to continue

Global stocks, US economy to dictate further market cues; Nifty should hold 17,700 for recovery to continue

By Ajit Mishra

Markets have been struggling for direction for almost one and a half months now and indications are pointing toward the prevailing tone to continue in the near future. Though the situation has improved marginally in the last three weeks, the upside still seems capped, citing restricted participation from the index heavyweights and intermediate profit taking/consolidation in the US markets, which we closely track for cues. Besides, the continuous underperformance of the broader indices is further adding to the participants’ worries.

Nifty (CMP: 17844.60)

After the recent rebound, Nifty is currently hovering around the moving averages ribbon (20, 50 and 100 EMA) on the daily chart. It should hold 17,700 for the prevailing recovery to continue and inch towards the 18,200 -18,350 zone. In the case of further decline, the 17,450-17,600 zone would be critical to watch for support.

Bank Nifty (CMP: 40,701.70)

The underperformance of the banking index is currently hurting the sentiment and it might continue to struggle until it decisively reclaims the 41,900 zone or forms some reversal pattern. On the downside, we expect the long term moving average i.e. 200 EMA, which currently lies around 40,000, would act as a strong cushion. In the recent phase, both private and PSU banking counters are seeing pressure but we feel investors can consider buying selectively into the private banking space on dips.

Stocks to Watch

Bullish – ABCAPITAL, COALINDIA, COROMANDEL, FSL, GNFC, IGL, MPHASIS, PERSISTENT, TATAMOTORS, TECHM, TVSMOTOR, SIEMENS, VOLTASBearish – INDUSINDBK, KOTAKBANK, LICHSGFIN, SBIN, TATAPOWER, ZEEL

(Ajit Mishra, VP- Technical Research, Religare Broking. Views are author’s own. Please consult your financial advisor before investing.)