Current consolidation likely to make markets healthy

Mumbai: The market could take a breather after the recent sharp  run-up as well as Moody’s negative outlook on India impacting sentiments in the near term.

Nifty witnessed profit booking on Friday session which saw the index gave up its weekly gains and closed the week on a flat note at 11908. Broader markets consolidated its previous three weeks gains and closed lower by 1 per cent each.

According to analysts, the weekly price action formed a high wave candle signalling breather after a rally of more than 900 points in the last four weeks. “We expect the index to undergo a temporary breather towards 11700-11800 range as after 900 points sharp up move in the last four weeks has led stochastic to overbought territory. However, such a breather should not be suspected as negative but would rather provide incremental buying opportunity,” said Dharmesh Shah, Head Technical — ICICI Direct.

However, the index is unlikely to breach the crucial support area of 11700-11800, he further said.

Meanwhile, broader market consolidated during previous week after last three weeks up move and analysts believe the current consolidation will make the market healthy. Going ahead,  Nifty midcap, small cap are likely to gain momentum and outperform benchmarks.

Sentiments were also dampened after Moody’s downgrade of India’s sovereign outlook from ‘stable’ to ‘negative’ citing increasing risks to the country’s economic growth as well as increasing pressure on fiscal deficit. Traders booked profit after Nifty climbed up over 4 per cent per cent (451 points) in the last eleven trading sessions. In the sectoral trend, Auto, Banking, Tech, Metal, Pharma and Cement stocks declined while select private banks and Realty stocks gained.

The market believe that the government will come out with bold reforms to spur economic growth.

“Technically Nifty formed a Bearish Candle on daily scale while Doji Candle on weekly scale. Multiple supports are seen at lower zones while selling pressure is seen near 12000- 12050 levels. Now it has to continue to hold above 11850 zones to witness an up move towards 12035 then 12103 levels while on the downside supports are seen at 11780 – 11750,” said Siddhartha Khemka, Head — Retail Research, Motilal Oswal Financial Services Private Ltd.

“Trend of the market will be dictated by macro releases. India’s CPI inflation is expected to be on the higher side at 4.3 per cent due to rise in vegetable prices as per consensus estimates. Despite the festive season the IIP is expected to decline to 2.3 per cent as per estimates. Both the data released is expected to put pressure on rate sensitive stocks. However global concerns related to trade war has eased and the same could provide comfort for investors, said Vinod Nair, Head of Research at Geojit Financial Services.