Indian market recouped losses of last week as Nifty50 closed above 11,900 levels in the week ended October 23. This suggests that bulls have not given up, but the action was largely seen in the small & midcaps which outperformed in the week gone by.
The Nifty50 rose 1.4 percent while the S&P BSE Sensex gained 1.7 percent, compared to a 2.4 percent rally seen in the S&P BSE Midcap index, and a 2.35 percent rally seen in the S&P BSE Smallcap index.
About 29 stocks in the S&P BSE 500 index rose 10-30 percent in just five trading sessions. These include Uflex, Vedanta, CEAT, Hindustan Zinc, Apollo Tyres, Oberoi Realty, Godrej Properties, and PC Jeweller, etc. among others.
Broader markets continued to outperform benchmark indices for yet another week which suggests that investors are chasing growth. Foreign institutional investors continued to remain net buyers while domestic institutional investors were net sellers in the week gone by.
Experts are of the view that after the recent run-up, the market could turn cautious in the lead-up to the US elections in November and the October series expiry in the coming week.
“Post last week’s massive one day decline, markets took a breather this week. Foreign and domestic investors continued their opposite stance and balanced each other with their buying and selling respectively,” Nirali Shah, Senior Research Analyst, Samco Securities told Moneycontrol.
“Global apprehensions on the outcome of US elections have invariably heightened. And bourses appear to be entering a state of hibernation until US elections outcome, but until then reaching new highs could be challenging,” she said.
Stable macro data and robust management commentary from India Inc during the September quarter fuelled the risk-taking appetite of investors. But, all eyes will be on US elections and any news about the COVID-19 vaccine. Investors can use the volatility to buy the dip, suggest experts.
“All eyes are on US markets for updates on the stimulus package and upcoming presidential elections. The news on COVID-19 cases in Europe will also remain on the participants' radar,” Ajit Mishra, VP - Research, Religare Broking Ltd told Moneycontrol.
“Volatility usually remains high in stocks during the earnings season and we’re seeing a similar trend. Amid all, the market is offering ample trading opportunities but the key is to identify the right stock. Since the bias is still positive, we suggest continuing with the buy on dips approach,” he said.
The Nifty50 closed above the crucial resistance level of 11,900 levels. The broader market stocks outperformed. But, Nifty witnessed selling pressure at higher levels which is not good news for bulls.
A small positve candle was formed with minor upper and lower shadow. Technically, this pattern indicates a formation of a high wave or spinning top type candle pattern.
But having formed this pattern in a rangebound movement, its implication with regards to the underlying trend of the market could be less, suggest experts.
“Nifty on the weekly chart formed a small positive candle with upper and lower shadow, which is similar to a high wave type pattern. This candle pattern was formed beside the negative candle of previous week,” Nagaraj Shetti, Technical Research Analyst, HDFC Securities told Moneycontrol.
The upper area of 12,025 has been acting as a key overhead resistance in the last couple of weeks and this hurdle could be tested again in the coming week.
“A sustainable upside breakout of this hurdle could have a sharp positive impact on the market ahead. The short term trend of Nifty continues to be range bound and the near term uptrend status remains intact,” says Shetti.
He further added that there is a possibility of Nifty to retest 12,000-12,050 levels by next week, before showing minor profit-booking again from the highs, and a decisive move above this hurdle could open the next upside levels of 12,250 levels and higher in the near-term. Immediate support is placed at 11,825.
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