The weekly dossier: Wondering about the next market moves? D-Street veterans give you cues

Global cues, rising cases of COVID-19, signs of further deteriorating macroeconomic indicators, rating downgrades by various global agencies for India and the United States Federal Reserve's subdued growth outlook of the US kept investors jittery as the equity benchmarks Sensex and Nifty ended lower by over a percent this week.

The S&P BSE Sensex fell 1.48 percent while the Nifty50 was down by 1.68 percent compared to a flat close seen in the S&P BSE Smallcap index, and 0.37 percent rally seen in the S&P BSE Midcap space for the week ended June 12.

There are as many as 36 stocks in the S&P BSE 500 index that rose 10-70 percent in five trading sessions that include names like Ujjivan Financial Services, Cochin Shipyard, Swan Energy, Info Edge, PC Jeweller, Granules India, and Dishman Carbogen, etc. among others.

Let's take a look at how the Dalal Street veterans see the road ahead for the market.

Dharmesh Shah, Head – Technical, ICICI direct

Empirically, it has been observed that after a major correction (more than 40 percent) index enters in a topsy-turvy phase, where after a first sharp pullback, it witnesses a corrective move.

In the current scenario, the analyst believes, after a 38 percent rally from the March low of 7,511 to the June high of 10,328, the index has entered in a corrective phase.

"We expect upside will be capped at the last week’s high of 10,300 mark and the index would extend its corrective phase with immediate support of 9,700 levels. A decisive close below 9,700 would further accelerate declines, else consolidation in the 9,700-10,300 band with stocks specific action," said the analyst.

Progression on containment of COVID-19 will be the key thing to watch. Besides, domestic markets are in sync with global indices in terms of direction. Key developed market indices have also reacted from overbought conditions and their key retracement levels and will have bearing on a direction of domestic indices, the analyst said.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities

Nifty would consolidate between the levels of 10,300 and 9,600, before giving any meaningful move. In case Nifty breaks the level of 9,500, then it would invite uncertainties. In that case, the index may even fall to the levels of 9,150 or 9,050.

Since 2015, the level of 9,100, acted as a major support for the market. It must be having some fundamental reason behind it because whenever the market approaches 9,100, it compels traders to take a pause.

In brief, any bounce back from the current levels to the levels of 10,200 and 10,330, would need to be handled cautiously.

"Avoid taking any fresh positions above the levels of 10,000 till 10,300. In fact, reduce weak long positions between 10,000 and 10,300 levels. Buying is advisable only on declines at 9,650, keeping a final stop loss at 9,500. Search for selling opportunities below the level of 9,500," said the analyst.

Deepak Jasani, Head Retail Research, HDFC Securities

While the Nifty has ended lower this week, the sharp recovery from the lows indicates the bulls are not willing to give control to the bears.

The intermediate trend of the Nifty that was up so far is now under threat. Markets could consolidate early next week before attempting to move higher once again.

On the downside, crucial supports to watch for resumption of weakness are at 9,718.

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote

Nifty reversed from a 61.8 percent Fibonacci extension of the first up leg which also coincides with 30-week EMA and forms a bearish cloud cover candlestick pattern on the weekly chart.

The market breadth for the week mostly remained weak. The index needs to decisively close above 10,150 to reclaim some momentum strength.

"We maintain a bearish outlook for the market going ahead. Traders should sell on a rally," said the analyst.

The important number to watch out for going ahead is India VIX which is currently at 30-32 levels. In the weeks to come, markets are likely to remain under pressure and VIX is likely to rise which will determine the speed of the market movement.

However, US VIX is currently at much higher levels of 40-41 which implies that the fear factor is again rising for the US markets after a terrific comeback.

Results from major public sector banks (PSBs) are awaited but they are also expected to somber the mood of the markets.

"We recommend investors to preserve cash and not to jump the gun in this phony rally and wait for markets to correct," said the analyst.

Jyoti Roy, DVP Equity Strategist, Angel Broking

While Friday's (June 12) positive momentum may continue into early next week, more volatility cannot be ruled out as the global market continues to grapple with grim economic reality on one hand and the Fed infused liquidity on the other hand.

"Given the uncertainties on both global and domestic front, we would focus on sectors and stocks which have strong revenue visibility and quality business franchises and avoid any stocks with weak fundamentals," said the analyst.

Arun Kumar, Market Strategist at Reliance Securities

Nifty50 witnessed some profit-booking after gaining for two weeks. It faced resistance slightly ahead of its 200-week moving average which is placed around 10,360.

The near-term oscillators are displaying mixed signals and a few of them are on the verge of triggering a fresh sell. However, on a medium-term basis, these measures are in buy mode.

From a price structure perspective, the index has formed a higher top and a higher bottom which is a positive factor. The options data, especially the moneyness chart, shows that the bulls are in charge of the ongoing rise.

Friday’s sharp gap down open at 9,544 witnessed contrarian buying on the back of weak sentiments by the smart traders. This indicates that the index could rise more over the next few trading sessions.

It could initially rally towards the zone of 10,160 – 10,250, any incremental strength may see the index attempt to test 10,360. On the downside, the index has fair support close to 9,500 and 9,250.

Broadly, auto, commodity, consumption, energy and infrastructure sector indices display positive traction and the key stocks in the mentioned group could post decent gains. The fast moving consumer goods (FMCG) and information technology sector lack strength and may struggle over the next few sessions.