Nifty, Sensex correcting for last four weeks as global cues, profit-booking weigh; broader markets resilient

Nifty, Sensex correcting for last four weeks as global cues, profit-booking weigh; broader markets resilient

By Ajit Mishra

We have been witnessing a gradual decline for the last four weeks, in continuation of the prevailing corrective phase. The recent fall in the global indices, especially the US markets, has also started weighing on the sentiment. In line with the benchmark, the continuous underperformance of the banking index combined with profit taking in heavyweights across sectors added to the pressure. However, rotational buying in select index majors in between is capping the pace of decline. And, the broader indices are still showing resilience, offering some comfort to investors.

Since we are seeing a mixed trend across sectors, participation should focus on stock-specific approach and maintain positions on both sides. Also, keep trailing stop losses on the rise in the profitable positions, especially in the midcap and smallcap space.Traders should be watchful for Nifty and Bank Nifty highlighted below and align positions accordingly.

Nifty (CMP: 19,393.60)

Nifty has been witnessing profit taking for the last two weeks and hovering around the support of short term moving average i.e. 20 EMA. The recent price action indicates a loss of momentum and we expect the index to consolidate in a broader range. In case of a further dip, the 19,100-19,300 zone would offer support while a rebound towards the 19,650-19,850 zone would attract profit taking again.

Bank Nifty (CMP: 44,002.00)

The banking index, Bank Nifty, has been continuing its underperformance and currently hovering around the crucial support zone of medium term moving average i.e. 100 EMA. We are expecting the 42800-43300 zone to offer a cushion in case the profit taking extends further. On the higher side, the 44500-45000 zone would be tough to cross citing the mixed performance of the private banking majors.

Stocks to Watch

Bullish – Axis Bank, Federal Bank, Hindalco, LIC Housing Finance, Maruti Suzuki, NMDC, Tata Consumer Products

Bearish – Delta Corp, Indraprastha Gas, Hero MotoCorp, UPL

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