F&O Talk | Nifty Holds 100-Day EMA: Breather Before Rally or Calm Before the Storm?
ETMarkets.com reports that Indian equities experienced a mild rebound, led by strong gains in select IT and banking stocks, following notable earnings surprises. Despite ongoing geopolitical and trade uncertainties, this uptick highlights the resilience of domestic financials.
Market Overview
– Recent Trends: After reaching an all-time high of 26,373 on January 5, the Nifty has entered a corrective phase but found support near the crucial 100-day EMA.
– Current Performance: Nifty is oscillating around this support level, indicating consolidation instead of panic selling.
– Weekly Chart: A Doji candle formation suggests indecision among traders, largely due to upcoming Q3 results from heavyweights like Reliance Industries, HDFC Bank, and ICICI Bank.
Technical Insights on Nifty
– EMA Analysis: The 20-day EMA is sloping downward, while the 50-day and 100-day EMAs are flat, reflecting a lack of strong market conviction.
– Momentum Indicators: The daily RSI has been trapped between 38.55 and 42.84 over five consecutive sessions, suggesting muted momentum and a wait-and-watch approach among traders.
– Potential Breakouts: Key levels to watch:
– Resistance: The 20-day EMA zone of 25,900–25,950; a sustained move above 25,950 could lead to targets of 26,200 and 26,500.
– Support: The 25,500–25,450 band remains critical; a decisive drop below 25,450 could intensify the correction.
Bank Nifty Performance
– Outperformance: Bank Nifty has shown strong performance compared to frontline indices, advancing by 1.42% last week amidst a largely unchanged broader market.
– Technical Indicators: Established a bullish candle on the weekly chart, demonstrating sustained buying interest at lower levels.
– Key Levels: Critical resistance at 60,400–60,500; a close above 60,500 might trigger a rally towards 61,200 and potentially 62,000.
Outlook on Upcoming Heavyweight Results
– Market Sentiment: The imminent earnings reports from RIL, HDFC Bank, and ICICI Bank are anticipated to serve as critical triggers for market direction.
– Expectation Management: Strong results could uplift market sentiment, while any significant moves will need validation through follow-through trading.
Sectoral Focus: PSU Banks and IT Sector
– PSU Banks: Nifty PSU Bank is poised for a consolidation breakout and is expected to continue outperforming in the short term.
– IT Sector Analysis: The overall IT sector is showing constructive setups, with recent breakouts from key stocks like LTIM, Tech Mahindra, and HCL Tech strengthening bullish momentum.
Broader Market Dynamics and Trade Relations
– Impact of Trade Deals: The anticipated outcome of an India-US trade agreement will heavily influence market sentiment. A balanced deal could ease uncertainty and revitalize FII inflows, particularly benefiting sectors like IT, pharmaceuticals, and manufacturing.
Conclusion
As we navigate this period of consolidation, all eyes will be on the results from major players within the Nifty. The interplay between strong corporate earnings, price momentum, and technical indicators will dictate the market’s next moves. Investors are advised to keep a close watch on the critical levels noted.
Recent market conditions lead to the question: Is this a breather before a rally, or merely the calm before a storm? Time will tell, but anticipation is certainly building.