Ashish Nambisan :
Last week it was suggested “A good reversal is seen from 22000 managing a close above 22550 with a ‘Harami’ formation indicating an upside however we should not ignore that we are still in a falling trend and we haven’t managed above the crucial 22670 mark which is also a golden ratio of 61.8%* Fibonacci. The supports are placed at 22400/22200. It is best to buy near supports with stops at or below 21960. Needless, to say that markets have not taken our support level of 21800 last week, which becomes more stronger as market respected it last week. So, till 21800 remains protected we are safe. Only a fall below can rupture the market towards 21500/21280. On Monday if we manage to stay above the mark of 22700 the implications will turn more bullish and we may try to touch even 23000 soon. Henceforth the mantra should be buy near the supports of 22400/22200 or buy above the 22700 mark for a target of 22900/23100.” (I am thankful to the reader who broght the mistake to my notice. Actually, it is 38.2% and not 61.8%.)
What happened next? We saw Nifty 50 opened on Monday Feb 10, at 22522 and it exactly touched the mentioned fib ratio of 38.2% which was 22670 and the high formed was 22676, just a marginal difference of 6 points. Moreover, it was also stated that the best buying point would be near the support area of 22400/22200, twice it occurred to touch 22320 and bounced back to 22577 levels, so the indices danced to the tunes of technicals quite precisely. Now the most significant question is What to accept ahead for the markets as we are trading above the support of 22000 but are unable to cross above 22700? Well, let’s look into the overall scenario.
The Global Picture
*On Thursday Trump threatened to slap a 200% tariff on wine, cognac and other alcohol imports from Europe, opening a new front in global trade war that has roiled financial markets and raised recession fears.
*Britain’s economy unexpectedly contracted in Jan. GDP fell by 0.1% in Jan pull down by a sharp drop in Industrial output compared with December.
*French inflation below 1% for the first time after 2021
* Germany’s fiscal expansion would boost GDP from 2026 says (DIW) Economic Institute. The 500 billion Euro infrastructure fund could raise economic output by an average of more than 2% points per year over the next 10 years. But it has cut its forecast for this year and next due to political uncertainty and global trade tensions.
* India Inflation cools, Industrial growth picks up.
Overview on Indices
FIIs were net sellers for the week worth ₹5730 crores in cash segment while DIIs were net buyers worth ₹5499 crores in cash segment. The stock market indices ended lower on Thursday despite a positive start as declines in IT, auto weighed on market sentiments while a fresh inflation data showed a decline and eases sharply with IIP growth surge and also a strong rebound in Manufacturing output but investor caution persisted due to global uncertainties.
On Thursday market remained volatile with Nifty closing below 22400 reflecting weak investor confidence even after the cooling inflation. Although the global factors are playing a spoilsport leading to trade within a narrow range the domestic factors have provided some relief. The IIP surge and easing inflation are showing positive signs of improvements in economic fundamentals. Retail inflation has eased in India raising hopes for interest rate cuts. The Industrial output in Jan exceeded expectations which will help to lift the market sentiment preventing further declines, but US recession may continue to influence the domestic market momentum. But we should not overlook the recent corrections has brought us to valuations along with factors like falling crude prices, easing dollar index and expectations of a rebound in domestic earnings in the coming quarters, may help and limit the volatility and is expected to contribute to stability amid prevailing trade uncertainties. Next week some important data like China retail sales and Us retail sales will be closely monitored which may provide a clearer picture on the global front.
Overview on Technical Chart
The benchmark Index exhibited a range bound behaviour due to prevailing global uncertainties and ongoing market apprehension which is clearly evident. The zone of 22670 has played a vital role last week and I had also explained its importance. Now this level of 22670 and 22700 has become more dynamic as we failed to cross it for the entire week. A decisive breakout could generate some upward momentum till 23000/23150.
Conclusion: The Indian Macro data cannot be ignored, the easing inflation, the rising IIP and strong rebound in Manufacturing output are some positive factors which may help to boost the investor sentiment. The global element is expected to play a crucial element in determining intermediate market trends so investors should be cautious and its better to refrain from making high risk bets but one should consider a systematically accumulating fundamentally strong companies. From 22000 on Nifty 50 we have been focusing on longs and avoided shorts, I would still focus on the same as we have added one more feather to the cap, previously it was only the long-term average of PE but now we also have our macro data which may help to overcome the fear of global uncertainties. Nifty 50 support of 22200/22400 has remained intact last week so my suggestion still would remain same the focus should remain on buy side unless we are above 22000 the shift will tilt only below 21900. So, the mantra will be buy near 22200 and maintain a stop below 21900. The intermediate supports are 22260/22120/22040 and the tough hurdle is seen at 22670 only a breakout above 22700 will help the index to rise till 23000/23150. Bulls will try to protect 21900 mark and bears will defend 22700 for the week. Any breach of these levels will ignite further move. So wait for an either side breakout for fresh moves or else buy the supports and sell the hurdles with appropriate stops.
