Weekly Market Outlook for 23 January to 25 January

In the week gone by, Nifty registered a new all-time high of 22124 in Tuesday’s session but it then witnessed a sharp correction where the index sneaked below 21300 in just a couple of days. The index recovered marginally towards the end of the week and it ended just below 21600 with a weekly loss of about one and a half percent.

Nifty Today:

Nifty registered a new all-time high at the start of last week as the positive reaction on the IT heavyweights post their quarterly numbers led to a continuation of the uptrend. However, the lower than anticipated results from the banking giant HDFC Bank led to a sharp sell-off in the counter, and this had impacted the benchmark indices which corrected sharply in just a couple of sessions. Now in this correction, FIIs have turned cautious on the markets as they sold heavily in the cash segment and in the index futures segment too they trimmed their long positions and formed short positions. Their ‘Long Short Ratio’ declined from 64 percent when the index was at high to 47 percent which means they have net short positions in the segment.

Also, technically the Nifty index broke its important support of 21450 which led to formation of a ‘Lower Low’ on the daily chart. Thus, the data has turned bearish and hence there's a high probability of index facing resistance at higher levels in the coming week. The 50 percent retracement of this correction is around 21700 and 61.8 percent retracement at 21800 which will be seen as the crucial hurdles. On the flipside, 21500 will be seen as the immediate support in the coming week as the put option of this strike has the highest open interest outstanding in the derivative segment. A move below this support could lead to a down move up to 21250-21200 range where the 40 DEMA is placed.

                             Indices correct due to FIIs selling, but PSU stocks continue out performance

In the last week, we have not seen any broader market sell-off as the midcaps have outperformed. The PSU stocks too were buzzing and continued to outperform inspite of volatility in the benchmark indices. Although no signs of reversal yet, it is advisable to avoid chasing these stocks at current levels and wait for either some time wise or a price wise corrective phase. Booking partial profit and taking some money off the table could also be a good strategy at this juncture.

Nifty, Bank Nifty Levels and  FINNIFTY Levels: