Market outlook: Any decisive break above 16,400 could open to 16,800: Nilesh Jain

“The overall setup suggests a major breakout in the 15,700-16,400 range over the coming week, and whichever side it breaks, we can expect a 300-400 follow-through in that direction,” said Niresh JainismAnalyst – Centrum Broking Ltd. Technology and Derivatives Research

in an interview ETMarketsJain said: “Any decisive break above 16,400 could open up further to 16,800, which is the 200-day exponential moving average resistance.” Edited excerpt:

Indian markets had a turbulent week, but the benchmark index closed flat to positive. What’s causing D-Street’s price action?
The bulls rebounded strongly after forming a triple bottom near the 15,740 level. However, the pullback was very short-lived as the Nifty again faced strong resistance near the 16,400 level.

As mentioned earlier, the market has entered extremely oversold territory and a pullback is imperative, as we have witnessed.

Nifty tested the 16,400 level that acts as a wall and a break above that level now will change the short-term sentiment of the market.

Next week we will be approaching the monthly expiry. How is the market likely to develop on Nifty and NiftyBank and any levels that traders should be aware of?
Markets are likely to remain extremely volatile ahead of the F&O expiry in the coming week. Derivative data showed new puts at 16,000 with the highest open interest, followed by 15,800, while new calls at 16,300 and 16,400 limited its upside.

The overall pattern suggests a major breakout in the 15,700-16,400 range in the coming week, and no matter which side of the breakout, we can expect a 300-400-point follow-through in that direction.

Bank Nifty also respected its psychological mark of 33,000 and witnessed a strong pullback from that point. The main resistance is now at 34,800, a break above that would change the trend and open up 36,000 to the upside.

Do you think we may have bottomed out after Friday’s rally? When can the bulls take over D-Street firmly?
The market ended a five-week losing streak and formed a bullish candle within the weekly range. This looks like a typical bear market pullback, unlikely to last and likely to be sold off. Hence, as long as the Nifty is trading below 16,400, a cautious approach is required in the market.

Any decisive break above 16,400 could open further towards 16,800, which is the 200-day exponential moving average resistance.

In terms of sectors, IT stocks fell the most. What is causing the price action? We also saw JPMorgan downgraded. Should investors reduce (underweight) their positions in IT?
The Nifty IT index continues to fall for the seventh week in a row and there is a structural failure. Nonetheless, momentum indicators and oscillators have reached extremely oversold territory, suggesting some pullback and should be used as an exit opportunity.

From a short-term perspective, there’s more pain in the IT package, and it’s best to stay away for now and shift focus to auto, FMCG, and pharma stocks.

Auto stocks lead the sector – what is the price trend, and will the momentum continue in the coming week? Which stocks look strong on the chart?
The Nifty Auto index surpassed its 200-day exponential moving average, which shows the inherent strength of the index. Momentum oscillator MACD made a fresh buying cross, suggesting further gains in the near term.

From a specific stock,

It posted a strong set of data this week and a technical breakout from its six-month downtrend line.

The 140/148 overall structure looks good with support at 124. besides,

Also reclaimed its 200-DEMA and favored the 2,800 level with support at 2,470.

FII sells off aggressively. So far, they have withdrawn more than Rs 42,000 from the cash portion of the Indian stock market in May. It’s time to trim positions from stocks with the largest holdings by FIIs.
FIIs have been steady sellers of Indian stocks over the past few months. Much of the sell-off was in the tech and banking sectors.

Emerging markets are expected to come under pressure in the coming months as global interest rates rise and the U.S. dollar index is trending upward.

In this case, FIIs are likely to see further redemption pressure in the Indian market as India has been one of the best performing markets in the world over the past 12 months.

(Disclaimer: Suggestions, suggestions, views and opinions given by experts are their own and do not represent the views of the Economic Times)

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