Market Outlook: Nifty bias negative, but expect sharp volatility

Mumbai: Mirroring the positive overseas cues, the markets started the day on a positive note. The BSE benchmark index, the Sensex, rallied to a high of 30,740 in the first half of the trading day. Thereafter, profit-taking emerged in select counters, mainly financials, which forced index pare gains. The Sensex touched a low of 30,117 towards the fag end of the day, and finally settled at 30,196 – up 167 points.

Among the Sensex 30 stocks, Bharti Airtel was the major gainer, as the stock skyrocketed over 11 per cent to Rs. 599 on the back of strong Q4 numbers. ONGC too surged nearly 6 per cent to Rs. 77.10 taking cues from rising crude oil prices. UltraTech Cement, ITC, PowerGrid, NTPC, Tata Steel, Maruti, HDFC and Tech Mahindra gained 2 – 4 per cent each.

On the other hand, IndusInd Bank, Reliance Industries and Larsen & Toubro were the major losers, down over 2 per cent each. SBI, Hindustan Unilever and Axis Bank were the other prominent losers.

Among sectoral indices, Bharti Airtel single-handedly accounted for over 10 per cent jump in the BSE Telecom index. The BSE Auto, Utilities and Power indices were the other significant gainers. On the flip side, the BSE Capital Goods and Energy indices declined 1.3 per cent each.

The market breadth was extremely positive in the first half of the day, but later on turned negative. Out of 2,460 stocks traded on the BSE, 1,288 declined and 1,021 advanced today. Further, mere 35 stocks recorded a fresh 52-week high on the BSE, while 129 stocks registered a new 52-week low.

Today, the BSE index traded within the previous day’s trading range, hence there are no fresh indications. Hence, the outlook remains the same, the BSE index may test it’s monthly Fibonacci S3 around 29,770, post which we could get fresh indications, including a possible trend reversal. However, in case 29,770, does not hold then the trend could remain bearish for the remaining couple of weeks this month. Any pull-back from current levels could run into stiff resistance around 31,280 and 32,300-odd levels.

On Wednesday, as per the daily Fibonacci charts, the BSE Sensex may seek support around 29,960-29,885-29,810, while in case of an up move the BSE index may face resistance around 30,435-30,505-30,580.

The NSE Nifty managed to touch 9,030 in morning trades, but eventually ended with a modest gain at 8,879 – up 0.6 per cent. The short-term trend which has turned positive, with the crossover of 20-DMA (Daily Moving Average) (9,237) over the 50-DMA (9,200), is likely to be short-lived, unless we see a sharp rally in the next few trading sessions.

The daily chart is also indicating a likely expansion of the trading range on the lower side. With momentum oscillators also in favour of the bears, a fresh fall for the Nifty seems imminent. On the downside, the NSE index may slide to 8,750 – 8,500-odd levels, while any up move may be capped around 9,200-odd level.

Among the key momentum oscillators – the MACD (Moving Average Convergence Divergence) and the DI (Directional Index) are in favour of the bears. The Slow Stochastic is also negative, but has reached oversold territory. The 14-day RSI (Relative Strength Index) remains in neutral mode. The key silver lining for the markets, that provides hope for the bulls, is the key ADX (Average Directional Index), which indicates that the current directional strength is not so strong hence a turnaround could be very much possible.

To conclude, it seems like the markets are likely to be headed towards a two-way volatile session in the coming days. The fight between bulls and the bears may just intensify.

Disclaimer: The article is for information purpose only and does not advocate any buy or sell /recommendation.