Bull vs bear: Will Nifty defend its bottom made on the budget day?
Nifty ended last week with a cut of 2.67%, followed by a six-day losing streak. We were already struggling to move higher, and now weakness in global markets due to a jump in US bond yields is acting as a key headwind. The market will continue to keep an eye on the direction of global markets along with the movement of US bond yields and the dollar index in the near term because the interest rate scenario in the USA will remain a dominating factor in the first half of 2023. The market isn’t currently responding to the geopolitical situation all that much, but any unexpected development—positive or negative—could cause the market to move significantly. Domestically, our Q4 GDP numbers and monthly auto sales numbers will be key macro factors this week.
Technically, we are in a short-term decline, but we are very close to the 200-day moving average’s critical support level, which also happens to be the low for the budget day. Bulls will therefore attempt to protect the Nifty’s 200-day moving average. If Nifty is able to maintain its 200-DMA, the index would form a double bottom, which might trigger a market rebound. On the upside, the 20-DMA near 17770 will continue to serve as a significant hurdle; above it, we may anticipate a short-covering move in the direction of the 18000–18100 range. However, there will be more selling pressure if Nifty is unable to hold its 200-DMA, and 17130 will be the next support level.
Similar trends can be seen in Bank nifty, where the 200-DMA and budget day’s low are both close to 39400. If it can maintain this level, we can anticipate a rebound in the direction of 41000 and 41500, but if it drops below its 200-DMA, we can anticipate further selling pressure in the direction of 38500.
The put/call ratio is at 0.79 and FIIs started the March series with 82% short positions, both of which point to an oversold market, if we look at the derivative data. The previous two times, in July and October 22, FIIs began new series with such substantial short positions that the Nifty experienced rallies of about 1000 points. This data represents hope for the bulls.
*Santosh Meena, Head of Research, Swastika Investmart Ltd.
*The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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