By Anand James
With a close above previous low, Bank Nifty is better poised to lead the moves next week. One of the main reasons is that three banks which constitute 60% of the index weightage are showing potential for reversal, and hence the fate of Bank Nifty will be decided more easily than Nifty.
Meanwhile, we feel that Nifty’s swing lower last from oversold levels is similar to the one seen in late May, except for two facts: Firstly, this time, the turn is from a higher level, and closer to record peak. Secondly MACD histogram has registered a sizable dip below zero line. While these two factors prevented NSE Nifty 50 from staging a recovery as swift as what evolved post late May’s fall, favored view sees a fair possibility of a regrouping first without stretching much beyond 18,500.
However the prospects of getting back onto the 18,888-19,070 trajectory is not clear, with 18,600 and 18,720 posing as key obstacles. Meanwhile, in the event of 18,500 giving away, 18,430 will hold only a slim chance of holding with 18,200 emerging as the first downside target, while also raising the vulnerability of the 50 DMA now positioned at 18,047.
On the other hand, USDINR, which has been swinging inside a wide range, is bracing for a substantial breakout. The multi month consolidation of the Indian Rupee has now formed an ascending triangle pattern awaiting a powerful upside breakout, but every attempt to breach this convincingly has faced failure in the last few months. Towards this end, the FOMC decision will be eyed with curiosity, while downsides for now are protected at 82.25-81.96.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)