Expect shortcovering-led rally once Nifty crosses 8,400

MUMBAI: The Nifty, after hitting a low for 2015, bounced back sharply and closed at 8,325 yesterday. The index faces some resistance now as it moves towards 8,400. If this zone is taken out, the benchmark may witness short-covering led rally.

Nifty found resistance at 8,332 level yesterday and has struggled around 8,320-8,340 on the upside. This will be a crucial level for the Nifty to take out.

The first challenge for the Nifty will be between 8,350 and 8,400 as it is an area from where the market retreated, says Ashwani Gujral, Fund Manager, ashwanigujral.com.

“It is possible that the market may consolidate, move back 50 points and then come with fresh momentum. Once we close past 8,400 you will see more short covering,” he told ET Now.

“Next 50-70 points are going to be really crucial and if IT and banks both can participate together then these levels should get taken out and the market will most likely come out of this correction,” he added.

According to Mitesh Thacker, technical analyst, miteshthacker.com, the first leg of the bounce-back which began on Friday morning might take some breather over here. Once we cross 8,340 we should then look at another 100-120 points happening on the upside.

“W continue to maintain long bias on stocks, the breadth still remains extremely positive and bias on the upside so for fresh aggressive buying on the index wait for 8,40 to be taken out,” he added

The sentiment in the market is likely to turn positive on reports MAT cases may be put on hold. According to PTI, CBDT has put on hold MAT assessments on FIIs. It will hold reopening of fresh cases post constitution of AP Shah panel.

According to analysts, post the 11% correction from all-time high, the Nifty had moved in over-sold territory. It provided a good entry point for investors who had missed the previous rally.

“The correction was pretty much on cards. Nothing bad has happened that India has to go back to 8,000 levels. The momentum has probably got to do with international positive news flow as well,” said Sudip Bandyopadhyay, President, Destimoney Securities.

In China, there is a hope that with the rate-cut impetus, the demand will pickup and that will benefit a whole lot of industries like metals, mining etc. that is getting reflected in today’s market. The stability emerging in UK also has added to the positives. In the near-term, the market will focus on European markets as Greece debt repayment is due tomorrow.

According to Bandyopadhyay, there are enough good opportunities available in frontline stocks which had corrected significantly and investors should start buying them.