By Ajit Mishra
Markets have been seeing profit taking for the last two weeks, taking a breather after 5 months of strong surge. The move is largely in line with the global counterparts, which are also witnessing a dip. Initially, the pace of decline was gradual but the underperformance of the leading sectors viz. Banking, auto and FMCG are adding to the pressure. However, stability in IT and pharma majors is somehow helping to cap the damage. Besides, the broader indices are still holding the ground and inching gradually higher.
It is a healthy correction so far and indications are pointing towards the prevailing tone to continue. Among the world indices, we are closely eyeing the US markets for cues. The key index, Dow Jones Industrial Average (DJIA), is still holding the short term moving average (20 EMA) and we expect it to hold the 34,600-34,900 zone if the decline extends further. And, it could help in keeping the downside capped and trigger a recovery in our markets too.
Since we are seeing a mixed trend across sectors, traders should focus on identifying stocks that are showing relatively higher strength amid consolidation and a few weak structures too. Besides, we have highlighted the key levels for both Nifty and the banking index so traders should align their positions accordingly.
Nifty (CMP: 19,597.30) – 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: 44,837.50) – The banking index has been underperforming and currently hovering around the crucial support zone of the 44,500 level. In line with the benchmark, it has also slipped below the short term moving average i.e. 20 EMA and is facing difficulty to reclaim the same. A decisive close below 44,500 would further add to the pressure and push the index to towards 43,500 levels. On the higher side, it could face pressure around the 45,500-46,000 zone. As we are seeing a mixed trend among the banking majors especially the private, traders should utilise this phase to gradually accumulate top names like ICICI Bank, Axis Bank and HDFC Bank on dips.
Stocks to Watch
Bullish – Bhartiartl, Divislab, Hcltech, Hindalco, Lichsgfin, Marico, SBI Life, Tata Power, Tata Steel
Bearish – ABFRL, Deltacorp, IEX, VEDL
(Ajit Mishra, SVP- Technical Research, Religare Broking Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)
