Nifty has been in a range for the last few weeks, swinging between gains and losses as market sentiment remains fragile in anticipation of more rate hikes and the consequent global recession.
The all-time high of the Nifty is 18,604.45 which it hit on October 19, 2021; the index is 5% down from that level at present.
Things have changed for the market since October last year. With concerns over Covid almost over and inflation at record levels, central banks across the globe have started hiking rates aggressively, which has upset the market sentiment. Investors believe rapid hikes in rates will deal a blow to the economic recovery.
The market has the tendency of discounting upcoming events. However, it seems that the market has still not been able to fully factor in the magnitude of rate hikes. There is no clarity as to how long rate hikes will continue.
Due to uncertainty, the market has been behaving without any direction in the recent past. There is high volatility and gains are followed by profit booking and vice versa.
If we see the data, we see Nifty has not been able to sustain above 17,900 even though it tried breaking this level in August.
Market participants feel perplexed, trying to figure out if the index has made a top and when it can break it. We talked to several analysts to get a sense of it. Here's what they say:
Analyst: Ajit Mishra, VP - Research, Religare Broking
Nifty has been consolidating in a range of 17,300-17,800 zone for the last three weeks, after a phenomenal surge. However, the tone is still positive as we’re seeing rotational buying across sectors barring the IT pack. Indications favour this consolidation to end soon and we expect Nifty to test the 18,100+ zone.
Analyst: Prashanth Tapse – (Research Analyst) Sr VP Research Mehta Equities
Volatility will continue to be the hallmark amidst uncertainty over the magnitude of the Federal Reserve's next rate hike.
For the short term, Nifty has made a top near 17,800-17,900. The confirmation of weakness will be below a crucial support at 17,401. Below this level, Nifty could drift to the 16,911 mark.
Nifty can break 17,900 on or before Diwali 2022 and try targeting 18,115 on the back of the bearish trend in crude oil helping domestic inflation to cool down and optimistic FII who are back in action for festival shopping in India.
Analyst: Sumit Chanda, Founder and CEO, JARVIS Invest
Nifty at 17,900-18,000 pushes it into "overbought" territory. For the time being, considering the events coming up, like the FOMC meeting, it looks like it will act as a strong resistance and we can expect some profit booking. Even the short positions built at those levels by the FPIs indicate that.
As far as Nifty breaking those levels go, in my opinion, it will take a couple of months. Possibly post Q2 results. Given the onset of festival season and Q1 results, the H2 FY 23 projections are expected to be good. This will aid in breaching those levels.
Analyst: Pranit Arora, CEO & Co-Founder of Univest
Nifty is currently moving in the range of 17,400 to 17,800 after reaching a high of 17,992 on August 19, 2022. On charts, it is taking a downward slanting resistance near 17,700 levels. That's why a short sideways trend can be seen near those levels with 17,450 as immediate support.
While it can break through resistance if it first crosses 18,000 and then 18,100 levels consecutively; if it moves below 17,450 levels, a down move towards the next support of 17,100 can be expected.
Analyst: Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking
The Index has faltered in the short time frame near the crucial overhead resistance of the downsloping trendline adjoining the highs since October 2021 at 18,000-17,900 levels in the last few sessions.
Nifty failed to sustain above the demarcated area and witnessed sharp weakness thereon. Consecutive long bearish candles indicating of an extended profit booking, such technical pattern build-up occurs after a sharp rise hence present setup is indicating a possible top reversal for the underlying.
A negative reversal type candle pattern was also formed on the weekly chart, resulting in a failure of an upside breakout of the significant downtrend line resistance. This pattern resembles closure to a bearish shooting star pattern and if Nifty forms a long negative candle subsequently, would signal more weakness for the short term.
Hence, for short-term traders, in case the index sustains below the level of 17,250 and trades convincingly below this level then there is a high probability that the recent high point of 17,992 might become a temporary top for the index.
However, sequential improvement in market breadth as a percentage of stocks above the long-term 200 days EMA, Nifty registered a bullish golden crossover and Brent Crude accelerating downward momentum could act positively for our domestic Indices and challenge the 17,800 levels.
Nifty is most likely to resolve out of the contracting range and gradually head towards the 18,300 level in the short-to-medium term.
Analyst: Kush Ghodasara, CMT, independent market expert
Nifty has been in a tight consolidation range since the high in August of 17,992 and it seems we have made a high for time being because Call writing is tremendous at the level of 18,000 for September and October expiry. I believe the near-term high is made and until October it seems difficult to break it.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.