By Rohit Srivastava of indiacharts.com
The period between October 2020 and March 2023 will historically be characterised as an 18-month consolidation phase inside an ongoing bull market. The entire decline at 18.30 percent from high to low is not large enough to be classified as a major bear market.
The shorter depth also indicates long-term strength where stocks continue to outperform selectively. The New High in the Nifty since March 2023, therefore, starts a fresh phase of a market rally after this consolidation that should last for months to come.
From March 2020, we are in wave 3 of a bull market, where the 2020-2023 consolidation is considered wave 2. The implications of such a view are that on a 2-3-year basis, we are set up for the Nifty to go to 35,000 from the low of 16,828 seen in March 2023. The major hurdle for the market comes in near 19,030, which is the trendline of the highs of 18,604 and 18,887 seen in October 2020 and December 2022, respectively, extended to the right on a chart.
As we get close to that level, it is possible that markets face selling pressure or profit booking from traders in the near term, but the long-term setup suggests that this will only be a pullback in an ongoing new bull phase from the lows of 2023 that should run into the end of the year at least.
On the downside, near-term support is at 18,563, and if we break that on a closing basis, we can dip to 18,265-18,000 before heading higher again.
Some parts of the market, like midcaps, are extremely overbought short-term with the RSI (relative strength index) at 86, which leaves us open to a knee-jerk reaction in the coming week as we get closer to the monthly expiration, especially for stock options.
However, it is worth reiterating that all pullbacks are part of a very strong bullish phase in the market that has started and should be going on for the next 2-3 years.
Best-performing sectors like Defence, Manufacturing, Banks, PSU, and Power should continue to lead the way forward.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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