Market Outlook: Current rally may be in its last legs; keep an eye on major hurdles ahead

@rex_cano

Mumbai: The markets rebounded in late noon trades on the back of heavy buying in financial stocks ahead of the Supreme Court hearing on the moratorium loan interest waiver case. The markets, which were trading on a weaker note suddenly, sprang to life in the last hour of the trading day. Meanwhile, later in the day, the Supreme Court instructed the government to give a clear plan on how it plans to waive interest for loans below Rs. 2 crore and scheduled the next hearing to November 2. “Diwali is in your hands now” said Justice Shah.

Earlier in the day, the BSE benchmark index, the Sensex, opened a tad in red at 40,623 and drifted to a low of 40,280 by late morning deals. A sharp rebound in the late noon deals saw the BSE index soar to a high of 40,880 – up 601 points from the day’s low. The Sensex finally ended the day with a gain of 169 points at 40,795.

Among the Sensex 30 stocks, Bajaj Finserv rallied nearly 4 per cent. Bajaj Finance, ICICI Bank, IndusInd Bank, SBI, Tata Steel, Axis Bank, Larsen & Toubro and HDFC jumped 2-3 per cent each. UltraTech Cement, HDFC Bank and Hindustan Unilever were the other notable gainers. On the other hand, NTPC plunged over 4 per cent. ONGC, PowerGrid Corporation, Tech Mahindra, Infosys, ITC and HCL Technologies shed 1-3 per cent each.

Also Read: Market Outlook: Markets in consolidation mode; bias to remain bullish for Sensex above 40,500

Tomorrow is expected to be an interesting day as the markets would have three major triggers to react. Financial shares will once again be in focus following the Supreme Court new timeline. IT major Infosys is expected to react to its earnings which were announced after the market hours. The company reported 20.5 per cent growth in net profit on a year-on-year basis at Rs. 4,845 crore and more importantly has revised its FY21 guidance upwards. And finally, the overseas cues are also likely to influence the markets.

As per the weekly Fibonacci chart, the BSE index is likely to gain strength above 40,900, and can potentially rally towards 41,180-41,390-41,600 during the course of the week. However, in the interim the BSE index may face considerable resistance around 41,200-41,250, which is a key resistance area as per the quarterly and yearly Fibonacci chart. On the flip side, in case the BSE index drifts back below 40,500, the Sensex can resume its slide towards 40,120-39,840.

As per the daily Fibonacci chart, on Thursday, in case of an up move the BSE Sensex is likely to face resistance around 41,020-41,100-41,170. On the other hand, in case of a decline the Sensex may seek support around 40,570-40,490-40,420.

The NSE Nifty from a low of 11,822, surged to a high of near 12,000-mark. The NSE index eventually ended with a mild gain of 0.3 per cent at 11,971. With select momentum oscillators showing some signs of tiredness, the current rally seems to be in its late stages. The 12,150-level is likely to be a major hurdle for the NSE index as of now. Whereas, on the downside, the NSE index is likely to test 11,600.

Among the key momentum oscillators on the daily chart. The DI (Directional Index) which has been positive for quite some time is now showing some signs of tiredness. The Slow Stochastic too has been inconclusive for quite some time and is in the overbought zone. The 14-day RSI (Relative Strength Index) too is in the overbought territory. However, the MACD (Moving Average Convergence Divergence) continues to remain in favour of the bulls.

Disclaimer: The views expressed in this article are personal and for information purpose only, it does not advocate any buy or sell /recommendation.