Nifty week ahead: Bulls and bears will tussle amid a lack of cues
It was the second consecutive week of weakness in the Indian equity markets, followed by new highs. The weakness of the US market and FII selling were major factors. The Indian equity markets are showing some signals of reversal for the first time in a long time, but their long-term structure is still optimistic.
Next week won’t bring any significant cues, so we may see a tussle between bulls and bears. Because the US market is currently experiencing the second wave of selling following the FOMC meeting, its direction will continue to be crucial.
Due to the fact that FIIs were net sellers for a significant portion of December, the institutional flows will be another crucial trigger. In addition, the market will be volatile due to news from China, variations in the price of crude oil, the dollar index, and US bond yields.
Technically speaking, Nifty formed lower highs and lower lows with a close beneath its 20-DMA, which is not a good sign for the bulls. But 18088 is a sacrosanct support level that won’t be easily shattered. If the Nifty recovers, the major obstacles will be 18440 and 18550. To reverse the bearish setup, Nifty must convincingly rise above its 20-DMA of 18530.
The Bank Nifty, the index that is now leading the bull market, experienced an evening star candlestick pattern with a close below its 9-DMA. However, the area between 43200 and 42950 is an immediate support zone, and 42625 is a crucial level where we may expect a bounce-back.
While, if it slips below 42625 then we can expect any major weakness. On the upside, 43500 will act as immediate resistance, and 44000 is the next hurdle.
If we look at the derivative data, then the long exposure of FIIs in the index future stands at 55%, which is neutral, while the put/call ratio of 0.81 is approaching oversold territory.
Santosh Meena is head of research at Swastika Investmart Ltd.
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