It was a historic week for the market as the bulls took the Nifty above 17,300 and the Sensex above 58,000 for the first time, clocking the best weekly gain in seven months. The ferocious rally can be attributed to positive global cues, strong FII flows and a weak dollar.
The bulls are in charge of the market and there are no signs of them abandoning control. The beauty of this week's rally is that it was broad-based with a gain in quality stocks and there was no euphoria kind of situation.
Technically, the Nifty ended the week with a bullish white long marabozu candlestick that may lead to a further upside where 17,520 is an immediate target, while 17,700 is the next target level.
Though the momentum indicator RSI is trading in an overbought territory on both daily and weekly time frames, the market can remain overbought for some more time. On the downside, 17,200-17,140 is an immediate demand zone to buy any dip, while 17,050-17,000 will be the next support area.
If we talk about derivative data, then FIIs' long exposure in the index future stands at 65 percent. They have added some long positions in the index options which indicate that the market is not overheated on the derivative front and hedged for any sharp dip that may restrict any immediate fall. PCR stands at 1.35, which is also a comfortable level.
If we talk about OI built up for next week's expiry, there is no major built up before 18,000CE, which has an open interest of around 52.5 lakh, whereas 17,300CE and 17,500CE both have around 29 lakh of open interest. On the downside, the open interest is evenly distributed between the 17,200 and 17,000.
The Bank Nifty still remains a puzzle that has unfinished business to test its new high where 37,200-37,750 is an immediate resistance zone but it has the potential to move towards the 40,000-mark.
If we talk about the cues for the next week, we are going to have a truncated week as the markets will remain closed on September 10 for Ganesh Chaturthi. We will react to IIP numbers later this as the data will be released on September 10.
Global cues will be important because we are outperforming the global peers and we may continue to outperform if there will be no major negative surprise.
The US market will remain closed on September 6 on account of Labor Day. There was not much movement in September 3, therefore, we can expect some consolidation in the Indian market on September 6 but if the Nifty consolidates, midcap and smallcap stocks may outperform.
Covid cases are rising in the US and in some other countries, a cause of concern for global markets. Movement in USDINR and FIIs' behaviour will be vital to watch out for as FII flows are playing an important role in the market.
Crude Oil prices will also have some impact on the market, where $74 is an important hurdle for Brent crude, above this, we can expect a move towards $76.Disclaimer: The views and investment tips expressed by 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.