By Anand James
Markets are heading into a perfect storm, with both FOMC as well as MPC showing their hands. We know now that, while rate cuts are coming, they will not be here in a rush. Hence, market bets are going to hinge on how soon they are to arrive, and along side, the elections across the globe will retain potential for acting as a trend setter or stopper.
In this backdrop, it is not surprising that Nifty has been showing signs of a clear unwillingness to surge to a new record high, hinting at the possibility of a time correction. But our modest objectives of 22240-22450/550 continues to be in play though, along with an optimistic target of 22800-23000.
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But any prospects of potential delay in the onset of rate cuts, could jolt the ride, but may not be enough trigger a collapse per se. We will have our downside marker at the 20d sma now near 21700, a close below which we could see the time correction in play, with bottom range seen as 20800.
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Meanwhile, Nifty Bank is going through a difficult phase, mainly because of its two main constituents were going in two different directions. While PSU bank index is near record peak, Private bank index is over 8% below record peak, and incidentally, Nifty Bank is dominated by private sector banks.
The profit booking in public sector enterprises that spread to state owned banks as well, took some sheen off those stocks, but the pull back towards close underscores the roaring bull market that they are in. Directional moving indicators are however suggesting that the PSU bank index is peaking, but an outright collapse is less expected, with favoured view expecting a side ways trend with a moderate incline for a while.
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With this in backdrop, Nifty Bank will have a difficult time to set a trend in the coming week. While the medium term trend is still positive, the near term is decidedly negative. But we had come close to seeing a solid reversal attempt on Friday, only to be timed out. We will start the week eying the 45750 as the nearest challenge to bring down, but near term trend would require a reclaiming of 47000 to bring confidence back in.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)
