The penultimate session of the previous week saw the markets catapulting higher backed by positive cues from the Euro-zone as Nifty regained the 5300 mark and managed to close above the 20-day SMA resistance of 5330. The index opened with a large gap of 49 points from the previous days high and continued to climb up mainly led by short-covering and fresh buying. We had indicated of a bullish reversal with the formation of ‘tweezers bottom’ coupled with a buy crossover on near-term momentum oscillators. In the special final session of the week, Nifty extended gains to close above the 5350 mark and importantly retrace 61.8% of the fall from 5449 to 5215. Market internals indicate higher turnover and a favorable breadth suggesting genuine long interest. Even the India VIX has dropped down to its lowest ever level of 14.76. Since the counter trend rally from the low of 5215 has met its target and the momentum is bullish, the up move could get extended towards the 78.6% retracement level of 5400. We prefer to be out of trade on the Nifty as we expect the up move to fail at current levels and resume its southwards journey. However, incase of a break and close above 5434 (trend line falling from the Feb high), the underline trend will turn up for targets of 5550 and possibly 5650. On the downside, a break below 5300 will accelerate the decline.
It was a good at the bourses as the most of the sectoral indices ended in the green. The up move was led by high beta Cap Goods (+3%), Banking (+2.3%) and Metals (+2.6%) sectors. Among the notable underperformer was the defensive FMCG (+0.70%) index. Mid-cap and Small-cap indices underperformed their frontline peer with gains of 1% each.
Bullish Setups: TCS, RIL, BIOS, HEXW, HPCL
Bearish Setups: LT, HDFC, TTMT, HNDL, HDFCB
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