Nifty outlook positive, but faces resistance at 100-DMA

As expected, the Indian equity market saw a strong relief rally on Monday, as NSE benchmark Nifty opened above its critical resistance area of 10,275-10,300 and moved up further.

Nifty ended with a strong gain of 194.55 points or 1.90 per cent. The gains were across the board with FMCG leading the rally. However, PSU banks grossly underperformed while realty and midcap indices remained relatively subdued.

Monday’s upmove was technically significant in many ways. It not only sent Nifty back inside the trading range, but also confirmed and validated the 200-DMA as a sacrosanct support for the immediate short term.


Going into trade on Tuesday, the Nifty shall encounter its 100-DMA, which stands at 10,454.41. It further has resistance at 10,520 levels. Supports exist at 10,380 and 10,345 zones.

The Relative Strength Index (RSI) on the daily chart is 48.0203 and it continues to remain neutral showing no divergence to the price. The daily MACD is still bearish, but it is seen sharply narrowing its trajectory.

If the pullback sustains and the Nifty moves on, it is likely to report a positive crossover in the coming days. A big white candle on the candles chart signifies the credibility of the support area of the 10,275-10,300 area.

The pattern analysis shows that the Nifty is back inside the trading zone, which was created with the formation of a rectangle after the most recent decline. Though there was a minor breach, the downside was protected by the 200-DMA after which the Nifty saw a strong pullback.

Overall, it is still important to note that the relief rally that was seen on Monday still remained more due to short covering. It is extremely essential that for the market to move on further.

It is likely that after a short deliberation by Nifty around the 100-DMA, the rally is likely to continue, but might see some intermittent jerks while it deals with its 100-DMA.

Continuance of positive outlook is advised for the day.

STOCKS TO WATCH: Technically resilient setup was observed in stocks like Bharti Airtel, Infratel, Jindal Steel and Power, NCC, DHFL, RPower, CGPower, Hindustan Zinc, Vedanta, Tata Global, Tech Mahindra and Adani Ports.

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