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.

Now all the major events are behind us, the performance of the global markets, especially the US, will be in focus for cues. Besides, crude and rupee movements will continue to offer indications in between. Meanwhile, the upcoming expiry of February month derivatives contracts would keep the traders busy. The positivity in the IT pack, after a prolonged corrective phase, combined with resilience in select auto, FMCG majors may continue to offer buying opportunities amid the prevailing consolidation phase while the recent underperformance from the banking and financials might hurt the prospects of strong recovery.

Amid mixed signals, we have highlighted the key area of support and resistance for both the Nifty and the banking index, which traders should use while planning their trades. Also, included a list of stocks that are showing strength alongside a few shorting candidates too.

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


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