Week full of volatility, investors will eye global indices; Nifty to retest short-term moving average

By Ajit Mishra

Markets traded mixed and finally settled almost unchanged, taking a pause after 3-weeks of advance. The beginning was upbeat, followed by modest gains in the following sessions however profit taking on  Friday engulfed all the gains. Eventually, both the benchmark indices, Nifty and Sensex, settled around the week’s low at 22,519.40 and 74,299.90 levels respectively. Weakness in global markets combined with caution ahead of the earnings continues to weigh on the sentiment.  Meanwhile, a mixed trend on the sectoral front kept the traders occupied wherein metal, realty and auto posted strong gains while pharma and IT traded under pressure. The broader indices too witnessed a similar trend as smallcap gained nearly a per cent while midcap closed flat.

The coming week is a holiday-shortened one and we expect volatility to inch higher. Among the key factors, participants will be closely eyeing the performance of the global indices, especially after the recent slide in the US markets. The Dow Jones Industrial Average (DJIA) has support around the 37,800-38,000 zone and its breakdown would add more pressure, which may reflect in our markets too. Besides, on the local front, the beginning of the earnings season could result in erratic swings across sectors.

Nifty has been trading in a broadening formation and facing hurdles around the upper band i.e. 22,700-22,800 zone. Indications are in favor of a further dip and likely to retest the support zone of the short-term moving average (20 DEMA) around 22,350 and next at 22,150. Considering the scenario, traders should focus more on stock selection and prefer a hedged approach.