Higher PCR restricting Nifty50’s upside, but market outlook positive

Indian market consolidated for major part of the session on Tuesday on expected lines. What was technically significant was that the Nifty traded in a resilient manner to the global weakness.

Even more important was that while it consolidated on Tuesday, it took support once again at its 200-DMA and rebounded from there. It finally ended the day gaining 33.20 points or 0.33 per cent.

For Wednesday’s session, we need to watch the market on similar lines. Runaway upmove may not occur, but overall the market may see followup gains. However, before such follow through upmove happens, we may once again see a rangebound consolidation wherein Nifty is once again expected to continue to defend the 200-DMA, which stands at 10,186.

The levels of 10,275 and 10,330 will play out as immediate resistance area for the market. Supports are expected to come in at 10,185 and 10,120 zones.

The Relative Strength Index (RSI) on the daily chart is 48.0716 and it continues to remain neutral against the price showing no divergence. The Daily MACD stays bullish while trading above its signal line.

The pattern analysis shows that the Nifty has managed to slowly crawl back above the 10,180, which was also one of the important pattern resistance areas before.

With the 200-DMA inching higher, in event of any consolidation happening, the levels of 10,180 are expected to act as support.

Overall, we do not expect a runaway rise happening given the overbought nature of the some of the oscillators and also relatively higher Nifty PCR (Put to Call Ratio). However, under no circumstances this point towards any kind of impending weakness.

We expect the market to consolidate and keep making efforts to inch higher. Any consolidation, if any, will lend health to the market to move higher.

We reiterate our advice to keep making select purchases during the periods of minor consolidation and maintain a stable outlook on the market.

STOCKS TO WATCH: Fresh long positions were seen being added on counters like Bank Of Baroda, South Indian Bank, NHPC, Tata Motors, DLF, HDIL, Vedanta, Federal Bank, Ashok Leyland, NCC and SAIL.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)