Indian equities have underperformed both global and Asian peers off late. Since this is a Budget week, the forthcoming sessions will be interesting for the market.
As of now, Nifty has managed to hold on its 50-DMA, which is at 10,780 level. The range of 10,780 to 10,837 levels remains an important support zone, as it has all the key DMAs — 50, 100 and 200 — in this range.
Global markets have remained steady and this may again give Indian market a positive start on Monday. However, post the expected positive opening, now it will be critically important for the index to sustain at higher levels to avoid any major weakness from creeping in.
The levels of 10,840 and 10,900 will act as immediate resistance area, while supports are expected to come in at 10,750 and 10,680.
The RSI on the daily chart stood at 47.1508, and it has marked a fresh 14-period low, which is bearish. It also showed a bearish divergence as the RSI has marked a fresh 14-period low while Nifty has not.
The daily MACD stayed bearish while trading below its signal line. An engulfing bearish candle emerged on the candles. Since it has emerged during a downtrend, we can expect a potential reversal from these levels. However, a confirmation is needed on the next bar.
Overall, the weekly charts of Nifty has remained intact with the index holding above its critical levels. However, on the daily charts, the index is showing mild cracks.
It will be important for the index to reverse from these levels to avoid any short-term structural weakness. The F&O data, which shows addition of shorts as reflected in the shrinking premium, shows possibility of market taking support at current levels.
With no structural breakdown yet on daily charts, we continue to reiterate avoiding shorts at current levels. A highly cautious and stock specific approach is advised for the day.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)