Weekly Market Outlook for 10 Oct to 14 Oct

In the week gone by, Nifty witnessed a pullback move from its ‘200 DEMA’ support and provided the much required relief move after the recent sell-off from 18100 to 17750. The index ended the week above 17300 with weekly gains of over a percent.

Nifty Today:

Our markets have seen a pullback move from the ‘200 DEMA’ support and have retraced the recent corrective move from 18100 to 17750 by 50 percent. On similar lines, the Bank Nifty index has also completed its 50 percent retracement around Thursday’s high. Now, it would be interesting to see whether the index continues its upmove from current levels or takes a pause again. In our sense, the data are not in support of any significant rally in the short term. The index corrected from the highs of 18100 primarily when the INR gave a breakout from the resistance of 80 and depreciated sharply. Now although the Dollar index has cooled off a bit from the highs, the INR has depreciated further and has surpassed well above 82. Also, if we look at the US Bond yields and the Dollar Index, the correction from the high does not signal a reversal of a trend yet and hence, one should keep a close watch on these factors. In the derivatives segment, FII’s have started the October series with significant short positions and have around 80 percent of the positions on the short side. Now coming on to technicals, both Nifty as well as the Bank Nifty index have just seen a retracement pullback and have not yet surpassed its important hurdles. 

Data does not hint at significant upmove in near term

All the above mentioned factors still makes us believe that we are not out of the woods yet and it would need a reversal of the data to change the view. Till then, traders should avoid taking aggressive long positions and rather be very stock specific and have a cautious approach. The options data hints at a broad range of 17000-17500 for the coming week, a breakout beyond this range could then lead to a trended move in the direction of the breakout.

Nifty & Bank Nifty Levels: