Nifty outlook: Expect some wild swings, focus on protecting profit

Friday’s session witnessed immense volatility on Dalal Street as the Nifty50 swung nearly 500 points and recovered over 300 points to end the day losing 91.25 points, or 0.81 per cent.

The panic came following a gory meltdown in the shares of banks and financial services companies, as investors feared a few of these companies might not be able to roll over their loans and service their immediate short-term debt obligations.



NBFCs literally saw a bloodbath, which spread to other quarters of the market, which got affected badly.

Going into a fresh week, we have more than one critical issue to deal with. We face the expiry of the September series derivative contracts and there will be rollover-infused volatility to deal with.

In the wild moves seen on Friday, the Nifty50 not only slipped below the important pattern support at 11,170, but also slipped well below the 100-DMA, which stood at 11,025. However, the Nifty50 managed to end well above that following a smart recovery.

The market is likely to see a shaky start on Monday and we expect some pullback. In the event of any weakness, the 100-DMA level at 11,025 will be extremely important to watch out for at close. We are likely to witness volatile oscillations before the market stabilises and inches higher.

On the higher side, Nifty might face resistance around 11,210 and 11,290 levels. The RSI on the daily chart stood at 53.8861. It has marked a fresh 14-period low and this is a bearish signal. A bearish divergence was also seen, as the RSI marked a fresh 14-period low, while the Nifty did not. The daily MACD continued to remain bullish even as it traded above its signal line.

Given all these facts, by no means this is a situation that investors need to react to with panic. Going out of the way from a technical view, we would strongly recommend traders and investors to refrain from reacting on any rumours but rather plan and protect their exposure to the market. We expect some shaky moves in the market and before it stabilises, some rangebound volatile oscillations are possible.

It is important to note that unless the previous week’s low of 10,866 is taken out, Nifty’s primary uptrend will remain intact and the market will remain well inside the 29-month-long upward rising channel on the higher timeframe charts.

We recommend traders to preserve liquidity and refrain from taking any aggressive bets on either side until stability returns and Nifty shows a definite directional bias. Nifty moving past the 11,170 mark and trading above this mark would be important to avoid any major weakness.

A highly cautious view is advised for the day.

Stocks to watch:
Traders continued to pile up shorts on stocks like Adani Power, Yes Bank, IDFC, IDFC Bank, TV18 Broadcast, Reliance Power, South Indian Bank, ICICI Bank, Idea, SAIL, Ashok Leyland, HCC, Tata Motors, Nalco and CG Power.

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