Indices edge higher
The Nifty and the Sensex are turning volatile. Intra-day corrections are likely
The domestic benchmark indices — the Sensex and the Nifty — recorded new highs last week amid volatility. The market took the RBI’s second straight rate hike to curtail inflation in its stride, with indices reversing higher on Friday.
However, the escalating global trade war between the US and China is back in the limelight.
Investors will need to watch the unfolding trade-related headlines and crude oil movement, as the US crude oil inventories are to be reported on Wednesday. Further, the US PPI and CPI data slated for release in the latter part of the week can lend direction to the global markets.
On the domestic front, the progress of the monsoon, rupee movement and the upcoming IIP and CPI numbers will be in focus.
The India Meteorological Department (IMD) reported that rain in August and September would be ‘normal’ at 95 per cent of the long-period average (LPA).
Last week, the Nifty 50 index advanced in the midst of volatility and recorded new all-time high along with the Sensex.
Short-term trend: There is no change in the short-term trend, which is undoubtedly up. The index trades well above its 21- and 50-day moving averages. But the index witnesses selling pressure at higher levels and shows choppy trading.
There has been a slight decrease in daily volume over the last one week. The daily indicators and oscillators are charting downwards, showing initial signs of weakness.
However, a strong rally in the coming weeks can vanquish this weakness.
The index faces resistance at 11,400. A strong rally above this level can take it higher to 11,500 and 11,655 levels in the short term. Key short-term supports are pegged at 11,210, 11,065 and 10,935 levels. As long as the index trades above 11,000, there will not be any major threat to the short-term uptrend.
Traders with a short-term horizon can buy with a fixed stop-loss. That said, a plunge below this level can weaken the uptrend and drag it down to 10,850 and 10,700.
Medium-term trend: Since taking support at 9,951 in late March, the index has been in a medium-term uptrend. While trending up, the index encountered a major barrier at 10,800 in early May and experienced difficulty in breaking above it until early July.
After a strong rally over the past five weeks, the index appears to be on a pause at current levels. Hence, there is a possibility that it could move sideways at around 11,400 before continuing the uptrend. A strong up-move beyond 11,400 will pave way for a rally to 11,600 and 11,887 over the medium term.
On the other hand, the index needs to sustain above the key immediate support level of 11,000-11,110 band for a few weeks. A conclusive break below this base zone will begin weakening the uptrend and drag the index down to 10,800 and then to 10,600 over the medium term.
The Sensex recorded a new high at 37,711 on Wednesday and, subsequently, fell sharply; however, it bounced back on Friday, recouping the loss. The index tests a key hurdle at 37,600.
A conclusive break above this level can strengthen the short-term uptrend and take the index higher to 38,000-mark in the short term with minor pause at around 37,800 levels.
Any corrective declines can find base at 37,200 and 37,000. A decisive plunge below 37,000 can drag the index lower to 36,600 and 36,500 levels.
Nifty Bank (27,695.5)
Following a strong rally in the week before, the Bank Nifty started to observe a minor corrective move last week.
Amid choppiness, it managed to climb 61 points or 0.22 per cent for the week, thanks to strong gains on Friday.
Testing the key resistance at 27,500, the index managed to end slightly above this level.
A strong breakthrough has not yet happened; such a break can take the index northwards to 28,000 and 28,500 in the medium term. Therefore, traders should remain on the side-lines until a clear break-out emerges. That said, a downward reversal can see a corrective decline to 27,000 levels in the near term.
An emphatic break below 27,000 will diminish the bullish momentum and drag the index down to 26,670 and 26,500 levels in the ensuing weeks.
Immediate resistances are at 27,800 and 28,000. Supports below 26,500 are pinned at 26,250 and 26,000.
The Dow Jones Industrial Average was choppy and traded range-bound last week. It almost closed on a flat note at 25,462.5. The index tests resistance at 25,500.
A comfortable breakthrough of the barrier will take the index higher to 25,800 and 26,000 levels in the short to medium term. But, inability to move beyond this resistance can drag the index lower to 25,200 and 25,000 levels.
A downward break of 25,000 can weaken the short-term uptrend and pull the index to 24,700 and 24,400 levels.
The Nikkei 225 index was volatile in the previous week and fell 181 points to close at 22,525 levels. It now tests support at 22,500. A slump below this base level can drag the index down to 22,200 and then to 22,000 levels in the short term. Resistances are at the levels of 22,750 and 23,000.