Market outlook: Nifty may consolidate before a fresh rally; use dips to buy

The market opened after a long weekend, but did not enjoy a buoyant start that was expected from it. The NSE benchmark Nifty opened with modest gains and resisted the 200-DMA for major part of the session.

However, the second half of the session saw the market gaining strength, with the Nifty not only crossing the 200-DMA level, but ending modestly above it, gaining 98.10 points or 0.97 per cent.

As we approach Tuesday’s session, Nifty faces some chances of consolidation once again. From technical perspective, Monday’s session was important as the Nifty ended above the 200-DMA, which stood at 10,182.


We expect a quiet start to the trade and see some consolidation in the initial stage. It would be important to see if the Nifty takes supports near the 10,180-mark, while it faces possible consolidation.

The levels of 10,245 and 10,320 are likely resistance area for the market on Tuesday. Supports will come in at 10,180 and 10,135 levels.

The Relative Strength Index (RSI) on the daily chart is 46.3027, and it continues to remain neutral against the price showing no divergence. The daily MACD has reported a positive crossover, and is now bullish while trading above its signal line. We had mentioned this possibility in our previous note. A white body emerged on the candles.

The pattern analysis shows that the Nifty has attempted to move past the 10,180-mark, which was its 200-DMA, and it also coincided to be the important pattern resistance area for the market. Though this has not been significantly breached on the upside, the likelihood of the continuation of the upmove definitely remains.

Overall, we may see some minor consolidation and then Nifty continuing the pullback, which it had started after defending the crucial 10,040-mark.

Having said this, we reiterate to continue making select purchases with each consolidation or a minor correction. We will continue to see select outperformance from select stocks sprinkled over few sectors. Cautious optimism is advised for the day.

STOCKS TO WATCH: Stocks like Hexawere, CG Power, Hind Zinc, Vedanta, Indiabulls Real Estate, TATA Power, Jamna Auto, Bombay Dyeing, NBCC and Trident will continue to see a relatively bullish technical setup.

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