Nifty Outlook - 20 Oct-2022

Nifty started another session on a positive note and surpassed the 17600 mark. However, we witnessed some profit booking at higher levels due to which both Nifty as well as BankNifty gave up the gains and ended marginally positive.

Nifty Today:

The markets have recently rallied from after forming a base around 17000 to over 17600 now. This pullback was anticipated as the global markets (especially US indices) were trading around their support and had positive divergences. The Dollar Index has also entered a short term consolidation phase and all these factors led to short covering move. Although FIIs are still net short in the system, they have reduced the quantum of short positions and thus their ‘Long Short Ratio’ have improved from around 15 percent to 30 percent. This clearly hints at short covering but since the Nifty has already seen a move of about 600 points in last few days and the INR has now hit a new low of 83, will the market sustain this pullback or witness a sell-off again? In our sense, depreciation in the currency is generally not positive for the equity markets but inspite of the INR hitting a new low, our markets have not seen a new low. This is a positive divergence which shows buying interest amongst market participants. Also the pullback move in the global equity markets does not seem to be over yet and hence, we may not see any sharp sell-off due to currency depreciation this time. We could witness intraday sell-offs which could lead to higher volatility, but until the index breaks some important supports, we expect the market to trade with a positive bias and expect buying interest on declines. The RSI oscillator on the daily chart remains in Buy mode while it has given a negative crossover on the hourly chart. This just indicates a possible profit booking and hence, one should look for buying opportunities on decline and not chase the upmove. 

INR hits new low; will it impact equity markets?

The immediate supports for Nifty are placed around 17350 followed by 17300 while immediate resistances are seen around 17600 and 17700. In such market conditions, focusing on a stock specific approach could be a better idea from a near term perspective.

Nifty & Bank Nifty Levels: