Weekly Outlook: Nifty needs to sustain above 9,500

Mumbai: The bears were caught on the wrong foot in this holiday-shortened expiry week. The markets were shut on Monday on account of Ramzan Eid. A sudden sharp reversal in the mid-week saw bears run for cover as the Nifty climbed almost 500 points in a matter of two trading sessions.

The week may have started on a muted note, but ended on a solid note owing to positive global cues, short-covering and hopes of more lockdown related relaxations as May 31 nears. The BSE benchmark index, the Sensex, touched a low of 30,512 early in the week. Thereafter the index soared all the way to a high of 32,481. The Sensex finally ended the week with a strong gain of 5.7 per cent (1,751 points) at 32,424. Despite the sharp rally, the BSE index, however, ended the month with a loss of 4 per cent.

Among the Sensex 30 stocks, Larsen & Toubro and IndusInd Bank zoomed over 13 per cent each this week. Hero MotoCorp, Maruti, HDFC Bank, ICICI Bank, NTPC, ONGC, Axis Bank, Asian Paints and Mahindra & Mahindra were the other significant gainers – up 7-11 per cent each. On the other hand, Bharti Airtel was the major loser down 7 per cent. Bajaj Finance and TCS also ended with modest losses.

The markets are now headed into a new week and month with renewed optimism. However, one must be cautious of the fact that any economic related negative data or global cues could play spoilsport. Also, market players will be keenly keeping a tab on the news flow related to the pandemic and neighbourhood conflict.

As per the weekly Fibonacci charts, on its way up the BSE Sensex may face resistance around 33,175-33,410-33,640, and in case of a down move the BSE index may seek support around 31,670-31,440-31,205. The monthly Fibonacci charts for June, indicate a wide trading range between 30,650-34,200, the picture would get clearer as we progress ahead.

The NSE Nifty ended the week with a 6 per cent gain at 9,580, but a loss of 2.8 per cent for month of May. More importantly, the NSE index has formed a bullish hammer pattern on the monthly charts, wherein the index has managed to close above the month’s open after recovering from a sharp fall. This generally augurs well for the bulls, hence sustaining above 9,500 would trigger more gains.

The monthly charts indicate that in June the NSE index may find considerable support around 9,265-odd levels, which is the lower-end of the Bollinger Band on the monthly charts. On the upside, the NSE index may rally towards 10,500-odd levels in the coming months.

As the weekly charts, quite a lot of factors are currently in favour of the bulls. The NSE index seems likely to re-test its recent high around the 9,900 level, while the downside could be limited to 8,950-odd level.

Among the key momentum oscillators on the weekly charts, the Directional Index seems to be firming up. The Slow Stochastic and the MACD (Moving Average Convergence Divergence) too are on the verge of giving a positive crossover. The RSI (Relative Strength Index) is in neutral mode.

The worrying factor for the bulls comes from the daily charts, where the ADX (Average Directional Index) is tepid, which indicates lack of strength for either the bulls or bears in the current market. Hence, there is every possibility for the Nifty to reverse its course in the near term.

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