Weekly Outlook: Volatility likely to continue; expect a two-way movement

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Mumbai: In the week under, the bulls were back in charge on the Dalal Street aided by positive global cues as hopes of the US stimulus package revived. Back home, too, the government is likely to dole out a second stimulus package in order to support the economy. The only negative part was that the up move was associated with high volatility as the markets brace for the all-important US Presidential elections next month. Friday saw turmoil in the US markets after President Donald Trump and his wife were tested positive for Covid-19, the US-30 Dow Jones index did recover at close, but tech-laced index Nasdaq ended sharply in red.

The BSE benchmark index, the Sensex, began the week on an optimistic note and thereafter consolidated its gains mid-week and finally signed-off the holiday-shortened week on a buoyant note. The BSE index scaled to a high of 38,739 and ended the week with a solid gain of 3.5 per cent (1,308 points) at 38,697 on Thursday. Friday was a market holiday on account of Gandhi Jayanti.

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Among the Sensex 30 stocks, IndusInd Bank zoomed nearly 21 per cent. Bajaj Finance, Axis Bank, ICICI Bank and HDFC soared 9-14 per cent each. TCS, Maruti Suzuki, SBI, HDFC Bank, Mahindra & Mahindra, Larsen & Toubro and Tata Steel were the other major gainers – up 6-8 per cent each. In fact, all the BSE index 30 stocks ended in the positive zone this week.

The BSE Sensex has started the month of October on an optimistic note and has given a minor buy signal on the monthly Fibonacci chart. As per the monthly Fibonacci chart, this month, the BSE index can potentially rally towards 39,160-39,500-39,840. On the other hand, in case of a down turn, the BSE index can drop back to 37,450-37,000.

As per the weekly Fibonacci chart, next week, in case of an up move the BSE index may face resistance around 39,150-39,290-39,440. In case of a decline the Sensex is likely to seek support around 38,240-38,100-37,960.

The NSE Nifty after dropping 4 per cent in the preceding week, bounced back strongly with a 3.3 percent gain to settle at 11,417. In the last two months, the NSE index has found support around the 100-WMA (Weekly Moving Average), which is currently around 11,070-odd level.

Going ahead, the markets may be extremely volatile as the overnight global news flow will weigh on the market sentiment. This week, the banking shares are likely to be in focus on account of the Supreme Court verdict on the PIL related to interest charged on the loan moratorium period. Towards the end of the week, the focus will also be shifting on Q2 earnings season. October is likely to be an action-packed month for the markets given the slew of major events lined-up.

Key momentum oscillators on the weekly chart are indicating a mixed outlook, hence it is possible that the NSE index may witness a two way movement next week. While on the upside, the NSE index may face some resistance around its recent high of 11,600-level, on the downside a steep decline towards the 100-WMA at 11,070-odd level cannot be ruled out.

Among the key momentum oscillators on the weekly charts, the MACD (Moving Average Convergence Divergence) is positive, while the DI (Directional Index) and the Slow Stochastic are marginally negative. The RSI (Relative Strength Index) remains in the neutral zone.

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