Market Outlook: Time to be cautiously optimistic as Nifty re-tests 100-DMA

Mumbai: The markets after a tentative start firmed up and rallied strongly on the back of renewed buying interest in financial stocks. Some short-covering in index and Bank Nifty futures on account of the weekly expiry also aided the up move. Meanwhile in other major news, the Supreme Court in its hearing on the AGR dues today, as asked the telecom companies to furnish financial documents for the last 10 years.

The BSE benchmark index, the Sensex, opened with a negative gap of 130-odd points at 33,371, and thereafter for almost an hour the index behaved in an indecisive manner. The BSE index began to march higher as the buying activity picked momentum in the second half of the trading day. The Sensex touched a high of 34,276, and ended with a solid 700-point gain at 34,208.

Among the Sensex 30 stocks, Bajaj Finance and Kotak Mahindra Bank surged over 5 per cent each. Axis Bank, HDFC Bank, SBI, PowerGrid, HDFC, Tata Steel, ITC, ICICI Bank, Reliance Industries and Mahindra & Mahindra were the other major gainers. On the flip side, ONGC, Hindustan Unilever, Bharti Airtel and Bajaj Auto were the notable losers, all down less than a per cent each.

Despite today’s strong 700 point rally, the BSE Sensex still remains trapped in the broader trading of 32,850-35,000. The BSE index may now attempt to test the higher end of the indicative trading band. Break and close above the 35,000-mark will open doors for further upside up to 37,200-odd levels.

As per the daily Fibonacci charts, on Friday, in case of an up move the BSE Sensex may face resistance around 34,550-34,660-34,770, and in case of a down move, the BSE index is likely to seek support around 33,860-33,760-33,650.

Also Read: Market Outlook: Nifty trading range gets narrower; global cues, news flow to set trend

With a strong 2 per cent gain at 10,092 on Thursday, the NSE Nifty precisely managed to test the 100-DMA (Daily Moving Average) on the upside. The intra-day high for the NSE index was 10,111 as against the 100-DMA at 10,112. The trading range has now further narrowed down with the 20-DMA now moving higher to 9,775.

Going ahead, the NSE index needs to sustain above 10,100-level for the upside momentum to continue. Failure to do so, could see the index slip back towards the 20-DMA. A close and break in either direction can chart the next course for the market.

Select key momentum oscillators on the daily charts are indicating a cautiously optimistic outlook. The DI (Directional Index) has turned clearly positive, but the ADX (Average Directional Index) indicates lack of strength. The MACD (Moving Average Convergence Divergence) and the Slow Stochastic are at converging point, hence inconclusive. The 14-day RSI (Relative Strength Index) is seen firming up around 61-odd levels.

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