Virus Concerns Continue to Plague the Markets
Since last week the Indian markets have been stuck in a rut as Nifty has been moving in the range of roughly 450 points between the 15,450-15,900 levels. The indices are finding it too difficult to cross their all-time highs while on the other hand, the zone of 15,450-15,500 is acting as a strong support zone and this is what exactly our call of action was in the last editorial wherein we had stated that it’s time for some serious consolidation. Despite moving in a band of 450 points, the last five trading sessions have been quite eventful as in each of the trading sessions Nifty has opened with a gap. The gap has been witnessed on both sides, but majorly it has been a gap-up affair for the markets.
Technically, the index on Wednesday formed a bearish belt hold-like pattern and this led to the formation of back-to-back bearish candles from the high of 15,895.75, which is hinting at a potential double top formation around the all-time high levels. Hence, in the near term, the zone of 15,450-15,520 would be watched closely. In case Nifty slides below this zone, it would result in a breakdown of the neckline of the double top pattern, which could be a negative sign for the index. The index on Wednesday tested its 20-DMA and interestingly, the index has not managed to close below the 20-DMA since May 5, though it has slipped below its 20-DMA on an intraday basis, but not closed below that. Hence, 20-DMA is a crucial support to watch out for in the near term.
On the other hand, Bank Nifty has been trading below its 20-DMA and the zone of 35,000-35,250 is likely to act as a resistance in the near term as the 20-DMA is placed around this zone and even the falling trendline is placed in this zone; hence, a breakout above this zone should empower the bulls and this could also help the Nifty index to move past its previous all-time high of 15,901.60. Let’s now shift the focus from technical to some important news. Moody’s Investors Services slashed India’s growth projection to 9.6 per cent for the calendar year 2021 from its earlier estimate of 13.9 per cent. The market has taken this news in its stride.
Meanwhile, a cause of concern is that the Union Ministry of Health and Family Welfare (MoHFW) designated the ‘Delta Plus’ variant of the novel corona virus as a “variant of concern”, though the speed of vaccination has picked up pace over the past few weeks. The debate is still on whether the vaccination is effective against this variant or not, but the centre is taking no chances and it has directed state governments to take up immediate containment measures, enhanced testing, tracking and vaccination in districts and cluster where the Delta Plus variant was found.
Overall, the markets are likely to spend some more time in a range and since there are only a couple of important announcements scheduled on the domestic front, market participants will be closely eyeing the global markets for cues. Besides, the progress of monsoon and updates on the vaccination drive would remain in focus. Among the sectors, defensive sectors such as Nifty IT and Nifty FMCG are likely to relatively outperform in the near term and hence traders should place their positions accordingly.
