Mr. Mustafa Nadeem, CEO, Epic Research
Nifty rebounds making a Hammer type pattern on the weekly chart indicating buying at lower levels after a stupendous ride by bears in a last couple of weeks. It is first to rebound after five weeks of continuous decline where bears slaughtered the bulls without a breath. The rebound this week has led to some relief to short-term bulls with a ray of hope in the tunnel.
Nifty declined almost 13% in the last five weeks while a rebound this week adding 3+% from the lows has given a short-term support. The pattern on the weekly chart is similar to a Hammer pattern that is a reversal pattern usually seen at the end of a trend. A hammer has a large shadow on lower side shows prices were driven to lower levels but bulls emerged to take prices higher and close near to the high of the week.
Though, with this pattern, Next week becomes crucial as a confirmation is necessary that should come with some volume expansion and buying with close above 10670 which is a midpoint of the previous weekly long candle.
For next week, Since there is a substantial drop in VIX we expect it to reduce further as nifty tries to make a short-term bounce to higher levels. The appreciation in Rupee by 3/4th of a percent has also added buoyancy in index and Stocks. The buying was seen in some blue-chips at lower levels such as Reliance, HDFC Bank, ITC and Maruti that indicated a short-term rally to be firm.
Fundamentals are lined up with Results / quarterly numbers of crucial companies such as Infy, Hero Moto Corp, ACC, Havells, Ultratech which may have a larger impact on its specific sectors. While with that on economic front we have WPI Inflation which was previously at 4.53% and will be watched while WPI Mfg was at 4.43%. These may give cues specifically when RBI has kept its interest rate hike on hold mentioning "calibrated tightening".
Nifty seems to be in a range for 10200 - 10250 on the downside to 10650 on the upside. It is a wider range while it may be narrowed to nearer levels once it sets the tone for the week on Monday. One must not be aggressive to go out for a bottom fishing as confirmation is not yet seen on charts which indicates a bounce to be as prudent as previous ones. We remain cautious since the medium-term trend seems to be in favor of bears.