The Nifty which hit a record high of 9,273.90 earlier in the month of April is losing momentum, largely weighed down by geopolitical concerns as well as muted start to the March quarter earnings season.
The index consolidated and closed 0.5 percent lower for the week ended April 14. Quarterly results of IT bellwether Infosys were a mixed bag for investors, as the company reported a disappointing 2.86 percent drop in the net profit while announcing the distribution of higher dividend payouts amounting to Rs.13,000 crore by way of share buyback program.
Technical evidence suggests that there is no intermediate top in place, but if geopolitical tensions escalate along with muted March quarter results, Nifty could well breach 9,000 level on a downside in a hurry which might reverse the trend.
The time of making easy money might be over as the market would now require fresh triggers to move on the upside. The greed with which most investors jumped into equity markets so far in the year 2017 is slowly turning into fear which is not a good sign for the bulls.
President Trump’s intervention in Syria last week and recent pronouncement on North Korea is a complete reversal of his election stance. A “warning” was issued by North Korea to target mainland United States with nuclear bombs.
“Such threats of Nuclear Warfare can cause stall the bulls worldwide. The Indian market was intoxicated with greed since last four months any type of geopolitical disturbances can easily create fear across the board causing markets to correct,” Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.com.
“There are a lot of uncertainties plus the results season on the horizon, the market would therefore not travel north in a hurry for now. Investors can wait and watch but hold on to their investments,” he said.
Equities loose sheen whenever safe havens like gold, bonds start trending higher. But, it may not be too early to call for the intermediate top. Positive results from companies like TCS, RIL could well give a boost to the market, but tread with caution, suggest experts. (Disclosure: Reliance Industries owns Network 18 and Moneycontrol.com.)
“At this juncture, there is no technical evidence to suggest that intermediate top is in place. It looks like too early to call for an intermediate top in the absence of sell signals on higher time charts. But, certainly, it looks like short-term top is in place which can drag down the Nifty50 towards 9000 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.com.
“In terms of Elliot Wave theory we presume that at the recent high of 9,218 registered on 17th March Nifty appears to have completed 3 waves and the subsequent fall can be labeled as the 4th wave which is chalking out in the form of an Expanded Flat,” he said.
Hence, the rally which we have seen from the lows of 9,019 to 9,274 is part of the corrective structure in the form of Wave B inside Expanded Flat. Subsequent correction from the top of 9,274 in the form of Wave C shall retrace 100% of Wave B and have a minimum target of 9,019 levels.
“Based on the wave counts, once this wave 4 gets completed, we expect one more leg on the upside beyond 9274 levels in the form of wave 5 of the impulse move which is in progress from the lows of 7893 registered on 26th of December,” said Mohammad.
Based on the weight of technical evidence, he recommends traders to go long around 9,020 levels and ride the rally for new lifetime highs again.