By Anand James
The fortnight ahead is crucial as positions get re-aligned in anticipation of fresh cues from the budget scheduled for July 23. Though the budget has come to be a non-event of late for capital markets, there is always a question of “what if” on the lips of many, as speculations never cease to leave the traders unaffected, be in terms of broad market announcements, or sector-specific cues. This is probably the reason why the rise in benchmark indices has been muted, but with all dips quickly bought, disappointing bears as well. VIX continued to decline from last month’s peaks, but we could potentially see a rise in the same in the next fortnight.
Nifty50
Early last week, the conditions were ripe for a swing lower, not only due to persistent overbought conditions but more because of how far Nifty stayed above the 20-day SMA. However, after being 3% away, which is extreme, a pause ensued in the uptrend, allowing the moving averages to catch up, reducing the urgency for a mean reversion down move. This explained the swings on either side through most of the days last week, which also reflected in a soft directional moving indicator. All this had limited our upside objective to 24400 or 24500, but weekly candles persistently staying above two standard deviations suggest that upsides have more room. Towards this end, we would start the week, with the expectation of an extension in uptrend aiming at 24500 or 24720-800. The downside marker is placed near 24250, but we will wait for slippage past 24130 to abandon the upside view.
Nifty Bank
Nifty Bank’s drop last week has interested both bulls and bears and is set up for wide-range movements in the week ahead. For now, it is weighed down not only by HDFC Bank, as 50% of the index constituents are still below their respective 10-day SMA. While it shows potential for an upmove, it is worrying that so many have not yet participated in the recent uptrend. We will begin the week needing to push above 53200, or at least 52800, in order to pursue upsides aiming 54200, but we believe that such a move will take a while to form, though we do not see clear possibilities of an outright collapse in the interim, with strong support seen near 51950.
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Sectoral cues.
The avg. 14D RSI of 70% of the pharma stocks is around 50 which is giving more room for the stocks on the upside. CNX IT index extended upside towards 37800 from 35200 and is on its way towards 38500 levels. Our eyes are however on the banking stocks. Among sectoral indices, it has more constituents that are below the 10-day moving average, which indicates a bearish set-up so far, but also points to the potential for a catch-up move.
(Disclaimer: Anand James is the Chief Market Strategist at Geojit Financial Services. Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)