Weekly Market Outlook: Expect volatility to rise in the remainder of the month

Mumbai: After starting the week on a robust note, the markets turned volatile in the latter half of the week as profit-taking crept-in largely on account of weak overseas cues. The stage seems set for more volatility ahead as the battle between the bulls and the bears could intensify as the benchmark indices attempt to re-test key technical levels. The focus is likely to remain on financial shares ahead of the Supreme Court hearing on loan moratorium case and global cues amid fears of a second wave of the pandemic Covid-19.

The BSE benchmark index, the Sensex, scaled a fresh three-month high at 34,928, surging as much as 17 per cent in mere 13 trading sessions. The index thereafter pared gains, before taking a massive hit on Friday morning, wherein the BSE index nose-dived to a low of 32,348 – down 2,580 points from the week’s high. However, a sharp rebound in the latter half of the trading day on Friday, saw the BSE index recoup all its intra-day losses. The Sensex eventually ended the week with a loss of 1.5 per cent (506 points) at 33,781.

Among the Sensex 30 stocks, Tata Steel shed 6.5 per cent. HDFC Bank, SBI, Kotak Mahindra Bank, Bharti Airtel, ICICI Bank, ONGC, Maruti, Larsen & Toubro, ITC and Sun Pharma were the other major losers, down 3-5 per cent each. On the other hand, IndusInd Bank zoomed 25 per cent. Mahindra & Mahindra, Hero MotoCorp, Bajaj Finance and HDFC were the other notable gainers.

Also Read: Market Outlook: Uptrend intact; Bias for June to remain positive as long as Sensex holds 32,850

The markets are now likely to witness higher volatility going ahead for the BSE Sensex has now given a sell signal on the monthly Fibonacci chart after having given a buy signal earlier in the month. It is likely that the markets after re-testing or nearing its recent high may fall back to fresh lows during the month. According to the monthly Fibonacci chart, the BSE index had crossed the monthly R3 (resistance) at 34,200 and given a buy signal. Going ahead, the BSE index may face resistance in the range of 34,200-35,000. On the downside, the Sensex may slide to 31,800-31,300 odd levels.

As per the weekly Fibonacci charts, next week, in case of an up move, the BSE Sensex is likely to face resistance around 34,770-35,070-35,370, and in case of a down move the BSE index may seek support around 32,800-32,490-32,190.

In a matter of a week’s time, the NSE Nifty after testing its 100-DMA (Daily Moving Average) at 10,330-odd levels, dropped sharply to its 50-DMA around 9,550. In doing so, the NSE index has failed to sustain above its 20-WMA (Weekly Moving Average) on a closing basis, which is around 10,005. The Nifty is now likely to remain volatile in a broad range of 9,600-10,200, with the possibility of downward extension towards 9,300-odd level.

The price action as per moving averages indicate an upside target for the Nifty around 11,000-mark. But, for that to happen, the Nifty needs to sustain consistently above the 9,950-odd level. On the downside, the NSE index may seek immediate support around 9,700 level.

Among the key momentum oscillators, the Slow Stochastic and the MACD (Moving Average Convergence Divergence) are still in favour of the bulls. The RSI (Relative Strength Index) is in neutral mode, while the DI (Directional Index) continues to remain in favour of the bears.

Disclaimer: The article is for information purpose only and does advocate any buy or sell recommendation.