Market Outlook: Markets may soon take a breather

@rex_cano

Mumbai: The markets rallied to fresh six-month highs on the back of frenzied buying in technology shares, after IT major TCS reported a better-than-expected Q2 performance and Rs. 16,000 crore share buyback plan. Overseas cues too were positive after the US President Donald Trump flip-flopped and hinted on the possibility of a sector specific stimulus package.  A day earlier Trump had tweeted that the stimulus package may happen only after the elections.

Back home, the BSE benchmark index, the Sensex, opened with a positive gap of 225 points at 40,204. The BSE index, thereafter, marched to a high of 40,469 led by strong gains in Infosys and TCS. Some profit-taking in the latter half of the day saw the BSE index pare gains. The Sensex finally ended 304 points higher at 40,183.

Among the Sensex 30 stocks, TCS and UltraTech Cement surged over 3 per cent each. HCL Technologies, Infosys, HDFC Bank and Sun Pharma gained around 2.5 per cent each. Tech Mahindra, ICICI Bank, Nestle India and Hindustan Unilever were the other prominent gainers. On the other hand, ONGC shed nearly 3 per cent. ITC, Reliance Industries, Larsen & Toubro and PowerGrid Corporation were the other notable losers.

Also Read: Market Outlook: Sensex, Nifty nearing overbought territory

The BSE Sensex, today, came within striking distance of its quarterly Fibonacci R2 (resistance) at 40,600, and then retraced a wee bit. The outlook as per the monthly and quarterly Fibonacci chart remains bullish. The BSE index may climb towards 40,600-41,200 during the course of the month or quarter.

As per the daily Fibonacci chart, on Friday, in case of an up move the BSE index is likely to resistance around 40,340-40,390-40,430. On the other hand, in case of a decline the Sensex may seek support around 40,030-39,980-39,930.

The NSE Nifty soared to a high of 11,905 and ended with a gain of 0.8 per cent at 11,835. The NSE index is currently hovering around its higher-end of the Bollinger Band on the daily charts, which is around 11,900-odd level. Given the recent sharp rally, the Nifty may take a breather and consolidate from the current levels. 

In case the NSE Nifty is unable to sustain above 11,900-level, we can see the NSE index decline towards 11,600-odd levels in the near term. The overall bias continues to remain optimistic, as the short-term trend which was on the verge of turning negative last week has reaffirmed the positive bias. The only worry for the markets now is that it is slightly overbought.

Among the key momentum oscillators on the daily chart, the DI (Directional Index) and MACD (Moving Average Convergence Divergence) continue to remain in favour of the bulls. However, the Slow Stochastic is showing some signs of tiredness. The 14-day RSI (Relative Strength Index) is also reaching overbought territory. 

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