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Stock market may see selling at higher levels

Probable, trading range for Nifty could be between 10540 and 10900

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Stock market may see selling at higher levels
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Last week, the broader Nifty managed to close with a gain of 0.63% at 10795 level though the market was very choppy and range bound. Meanwhile, the mid and small cap indices remained flat to positive.

Among the sectors, FMCG (1.88%), Pharma (1.30%) and IT (1.14%) emerged as the winners while Metals (-1%), Media (-0.91%), Energy (-0.75%) were the top losers. Bank Nifty also gained by 0.95% with both the PSU and private banks rose 1.1% each with Axis Bank and ICICI Bank advancing by 7.5% and 3% respectively.

The foreign institutional investors (FII) sold equities worth Rs 238 crore while the domestic institutional investors (DII) bought shares of Rs 1,130 crore.

In the last week highlights, earnings season kicked off with not much of excitement as IndusInd Bank announced a mere 5% profit growth due to provisioning for IL&FS exposure. Operating performance of Tata Consultancy Services (TCS) was weak and missed in profit margin. Infosys also announced lower than expected profits but raised FY19 growth guidance upwards aided by strong deal wins. The company also announced a buyback of shares worth Rs 8,360 crore from the open market.

HPCL and BPCL lost ~6% as crude oil spiked by 9% to $62 post-Saudi Arabia announced to slash its oil exports by 10% in January. Tata Motors gained 6% on better December JLR sales. India's November month Industrial Production (IIP) rose by just 0.5% (YoY), slowest in 17 months with a broad-based deceleration in industrial activity. Mining and Electricity also slowed down sharply which may lead to lower GDP growth projection or FY19. Indian markets remained higher after a dovish comment by the US Fed chairman and rallied to make high of 10870 and corrected in the last two consecutive sessions towards 10740 awaiting the outcome of the US-China trade talks and rising crude prices.

In the key global events this week, UK Parliament Brexit vote is scheduled tomorrow and G20 meeting which is commencing from Wednesday. Domestically, India's CPI and WPI data will be released today while December month Trade Balance data will be out tomorrow. In the ongoing earnings season, Wipro, Zee, KPIT Tech, DCB Bank, Mindtree, Federal Bank, Hind Unilever, NIIT Tech and HDFC Bank will announce their Q3'19 results. The outcome of Reserve Bank of India vs Kotak Bank promoter holding case hearing will be on Thursday.

Technically, Nifty formed Doji pattern on a weekly scale which indicates selling at higher levels. The 50-share index traded in the range of 10870-10730 within my predefined range of 10560-10940. This week, markets will take cues from the corporate earnings, Brexit vote and outcome of the US-China trade talks. Nifty has closed below its 200- day simple moving average (DSMA) of 10800 now support levels at 10710-10650-10540 while resistance levels at 10880-10940. The probable, trading range for Nifty could be between 10540 and 10900.

The writer is VP-retail research, Motilal Oswal Financial Services

SELLING PRESSURE:

  • Technically, Nifty formed Doji pattern on a weekly scale which indicates selling at higher levels
     
  • Nifty has closed below its 200- D SMA of 10800 now support levels at 10710-10650-10540 while resistance levels at 10880-10940
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