Nifty Outlook: The strong recovery of about 200 points in Nifty from the day’s low on Friday has made two important things clear about the direction of the market. First, the bulls do not want to let Nifty go below 25,500 at any cost.
Second, the big stocks in the index are not completely exhausted yet. This is the reason why despite pressure at upper levels, Nifty was successful in protecting important support levels.
Now due to what reasons can Nifty rise?
The beginning of the new trading week may give some solid reasons for Nifty to move upwards. The biggest trigger is the framework of the India-US trade deal revealed over the weekend. With this it has become quite clear who will get what benefit. This has removed a huge burden of uncertainty on the market.
The second important factor is the recovery in Wall Street on Friday. IT stocks can benefit from this. Especially, when the IT sector had seen its weakest week in the last four months. Due to this, relief movement may be seen in IT shares.
Trend positive, but caution necessary
Although Nifty is still down about 650 points from last Tuesday’s high of 26,341, buying has been seen on every dip in the last two trading sessions. This indicates that the trend is currently inclined upwards.
Despite this, it is important to be cautious, because on the chart Nifty has made lower high and lower low for another consecutive day. Unless this pattern breaks, sustained bullishness at higher levels will not be confirmed.
Why is the level of 25,500 so important?
It was a matter of relief for the bulls that even after slipping below 25,500 on Friday, Nifty recovered and closed around the day’s high. From this it became clear that this level remains a strong support for the market.
If we look on the upside, first 25,757 (Thursday’s high) and then 25,818 (Wednesday’s high) will be the important resistance. After crossing these levels, the figure of 26,000 can prove to be a turning point for Nifty this week. At present the biggest support on the downside remains at 25,500.
Next signals will come from earnings season
Earnings season is now in its final stages. Many big companies will release their results in the coming week, which include big companies like Hindalco Industries and ONGC.
As soon as this round of results ends, the market will get new indications for the next direction. Till then the movement of Nifty may be seen revolving in this range of support and resistance.
Experts’ opinion on Nifty
According to Rupak Dey of LKP Securities, the index has been in a phase of consolidation for the last few sessions. On the downside there is a strong support of 25,500. At the same time, upward resistance is visible around 25,700. Nifty is likely to remain in the range of 25,500-25,700 in the short term. A decisive breakout on either side of this range could trigger a directional move in the index.
According to Nagaraj Shetty of HDFC Securities, the big upside opening gap created on February 3 remains partially filled even after four sessions. If this gap remains partially filled over the next few sessions, it can be considered a ‘bullish runaway gap’, which usually forms in the middle of an uptrend. In such a situation, a sustainable move above 25,800 can take Nifty to 26,000 and then to 26,350. Immediate support remains at 25,500.
How will be the condition of Bank Nifty?
Another positive aspect of the market was the strength of Nifty Bank last week. Despite every fall, the index managed to close above 60,000 for four consecutive trading sessions. This level will remain very important in future also, whereas the record high of 61,764 made last week is still some distance away.
Sudeep Shah of SBI Securities believes that the zone of 60,300-60,400 is an immediate resistance for Nifty Bank and is an important supply area. A sustainable breakout above this zone could take the index towards 60,800 and then 61,200. On the downside, 59,700-59,600 (20-day EMA) can act as a strong support.
According to Vatsal Bhuva of LKP Securities, buy-on-dips strategy can be adopted in Nifty Bank, provided the index remains above 59,500. On the downside, immediate support is around 59,800. At the same time, profit booking can be seen on the upside near 60,800.
SBI Q3 Results: State Bank of India’s December quarter profit increased by 24%, NPA declined
Disclaimer: The advice or opinions expressed on Moneycontrol.com are the personal views of the expert/brokerage firm. The website or management is not responsible for this. Moneycontrol advises users to always seek the advice of a certified expert before taking any investment decision.