CLSA's Laurence Balanco says Nifty could correct 600 points toward 50-DMA in near term

The Nifty which has already rallied over 17 percent so far in the year 2017 could well come under some pressure as the momentum seems decelerating, Laurence Balanco, Global Technical Analyst at brokerage firm CLSA said in an interview with CNBC-TV18.

The key short-term risk for the Nifty is a slowdown in momentum which is a near-term risk for the index. “The current breakout in the uptrend is decelerating and there is a possibility that we come back to 50-days moving average around 9000-9100 which would be more of buying opportunity,” said Balanco.

“If we look at the momentum indicators to look at the speed and rate of change on charts over a period of time indicate deceleration of the trend and we see Nifty pullback towards 9,100 or 600 points,” he said.

However, on the long term basis, Nifty is on track to hit 12,000 mark. “The longer term set-up remains bullish. The key technical event was a break above 8,800-9,100 area earlier this year which gave us an upside target of 10,300-12000,” he said.

Commenting on the sectors, Balanco said that when the broader bank index leads the breakout gives an overall confidence in the market. The other sector which joined the breakout was the FMCG sector.

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Key technical to watch out in the Nifty Bank index is its 50-DMA which will act as crucial support for the index. The other level to look at is the combination of March 2016 and September 2016 area which will act as crucial support for the index.

Commenting on the US Treasury yield, Balanco said that US 10-year yield is a key indicator for stock market experts globally. The US 10-year yield is on a key ledge of support at 2.12-2.16.