By Anand James
Consecutive days of upcloses brought cheer to Bank Nifty traders, an event that has occurred for the first time since hitting record peak in September. Yet, we are yet to clear the congestion resistances of the last fortnight. This along with the 50DMA at 44,760 presents a very formidable hurdle for bank nifty. This forces us to continue with a cautious approach, rather than embarking on an outright recovery play. But, given the three day ascent seen in MACD forest, and the oversold territory from which the index is coming off, there is still a reasonable window to pick upswings, but prospects appear limited as long as the 50DMA stays above.
With last three days energetic leaps, Nifty appears primed for a run upto 19,900. But, we have stalled exactly at the upper boundary of a declining & broadening wedge, which calls for some caution on Monday. We hope that the cushion provided by 20day and 10 day SMAs in the 19,600-19,570 will be enough to keep nerves steady, in the event of pull back. Upside hopes will significantly dwindle should we close below the same. While a push above 19,670 should clear the path for 19900, it may be premature to look for 20600 right away, as we see vulnerability setting in again on completion of 61.8% retracement of the Sep-Oct downtrend.
It is important to take note that October is historically a good month for markets, encouraging us to approach the earnings inflow with optimism. IT stocks will go into Q2 earnings season largely as a laggard, especially with the majority of the IT index stocks below 10 day moving average. The strength so far is provided by TCS and INFY, the biggies in the index, and towards this end especially, the opening salvo from these stocks at the beginning of the earnings season could set the trend. But it would also mean that the IT stocks will have plenty of upside room, if earnings numbers support and we are expecting this sector to give plenty of upside opportunities.
Meanwhile, despite consistent close above 83, momentum continued to elude USDINR. And yet, the sharp pull back mid September from dips to 82.78 is suggestive that a strong push higher could unfold any time. With the history of disappointing performance month after month on seeing 83, we prefer to play such an upside move only on close above 83.4, in which case, 84-84.5 could be played. Downside marker meanwhile is at 82.78.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)