Market outlook: Nifty50 likely to consolidate if it gives up 10,785

The battle for Karnataka infused immense volatility in the market on Tuesday, as the NSE benchmark Nifty50 moved over 120 points on either side before ending flat, losing just 4.75 points or 0.04 per cent.

The possibility of an absolutely majority for the BJP fuelled a rally in the market with Nifty trading over 115 points higher in early trade. However, the second half, wherein the possibility of a hung assembly became evident, the Nifty pared all of its gains to end flat.

With the political even behind us, we now see that the Nifty has pushed again for some consolidation.


As we approach Wednesday’s trade, we see a quiet start to the session. Volatility has remained ingrained in the market. Any slip below 10,785 will push the market for some prolonged consolidation in the near term. The levels of 10,835 and 10,890 will act as resistance areas for the market. Supports will come in at 10,780 and 10,710 zones.

The Relative Strength Index (RSI) on the daily chart stood at 66.9352. It remained neutral and did not show any divergence against the price. The daily MACD remained bullish while it traded above its signal line.

On the candles, a long lower shadow occurred. With this formation occurring after an upmove, it can potentially stall the rally and can push the market into consolidation.

The pattern analysis saw the market failing to break below the 10,785 mark. At one point with the market trading well this level, it had given a breakout, but this was not sustained as the Nifty pared its gains in the second half of the trade.

Overall, though Nifty attempted a breakout above the 10,785-mark, it is likely that will take some more time to confirm this. The Nifty has most likely pushed itself again for some more consolidation.

If there is any significant slip below the 10,785 mark, more weakness is likely to creep in.

This being said, with the structure on the charts remaining intact, pain, if any, will remain more visible in the broader market than in the frontline Indices.

We recommend remaining light on positions and maintain a cautious view on the market. We also recommend utilising such dips to make select purchases in the quality stocks.

STOCKS TO WATCH: Short positions added in stocks such as National Aluminum, CG Power, NCC, Tata Motors, Ashok Leyland, BEL, ITC, PFC, Tata Motors, Indiabulls Housing Finance, Vedanta, NBCC and Axis Bank.

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