Markets

Market outlook: Nifty may remain volatile; keep positions in check

As expected, the session on Monday headed nowhere, as the market oscillated in a narrow range and ended flat gaining 0.10 points or 0.01 per cent. The Nifty managed modest gains in the morning, but it pared those gains during the day.

The lower levels too did not sustain and the index ended largely unchanged from the previous levels. However, the levels of 10,785 stood defended as of Mondays close.

As we step into Tuesdays trade, we face a key domestic event in form of Karnataka election results. It is likely to instil volatility in the market. Speaking on technical lines, even though the market is expected to defend levels of 10,785, some volatile moves and oscillations in a defined range cannot be ruled out before it resumes uptrend. Presently, it continues to remain under consolidation.

Tuesday will see the levels of 10,830 and 10,895 acting as immediate resistance area. Supports may come in at 10,750 and 10,705 zones. Given the likelihood of volatility, the potential range for the market remains wider than usual.

The Relative Strength Index (RSI) on the daily charts stand at 67.4864. It continues to show bearish divergence against the price. The daily MACD stays bullish, as it trades above its signal line. On the candles, a Spinning Top occurred. This is typically a session with very small real body, which signifies indecisiveness of market participants.

The pattern analysis shows that the Nifty attempted to inch higher after a brief period of consolidation. It broke out of a rectangle range, marked a high of 10,785, and since then it has been consolidating in a much capped range. Though a breakout has been attempted from this congestion zone, a confirmation is awaited.

All in all, we once again expect a tepid start to the trade on Tuesday. The tentative nature of the market was evident on Monday, and it is likely to remain evident in the Tuesdays trade as well until we get clarity on Karnataka election results.

A hung assembly already seems discounted, however, a volatile reaction is likely in the event of results turning out in favour of or against the BJP.

We recommend remaining light and moderate on overall positions and adopt highly stock specific approach. Though shorts may be avoided, fresh purchases may be kept highly selective in nature.

A cautious view on the market is advised for Tuesday.

STOCKS TO WATCH: Short positions were seen being added in stocks like Ashok Leyland, Tata Motors, Tata Global, PFC, Adani Ports, Nalco, Reliance Power, PTC, BHEL, NCC, Bharti Airtel and SAIL.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

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