Market showing sign of consolidation

Mumbai, Apr 1: Markets are seen edging higher in early Monday trades on the back of a firm trend in the Gift Nifty index and optimism in other Asian indices.

Investors are likely to resort to bargain hunting, and the recent reiteration by the US Fed that it is still looking at 3 rate cuts this year despite challenges from the inflation front is expected to keep the markets in good stead.

“While intra-day volatility could continue in the near term, the focus will slowly shift to fourth quarter corporate earnings which will start rolling in the next few day's time. ,” says Prashanth Tapse, Senior VP (Research), Mehta Equities

The Nifty options data suggests that the benchmark index is likely to be in a trading range of 22600 zone.

Our chart of the day suggests stocks like Adani Enterprises, Adani Port and Eicher Motors are expected to witness bullish trend with an interweek perspective.

The undertone of the market is bullish and there is momentum in the market. The market has been showing signs of consolidation but the spurt in Nifty by 322 points on the last 2 trading days indicates that the upward momentum can sustain.

”There are reports of mutual funds introducing restrictions on redemptions from the smallcaps schemes. This is in response to the frothy valuation in this segment and the concerns expressed by the regulator” says Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

The consequence of this action would be higher flows of funds into the largecaps, which, in turn, can lift the largecaps. During the truncated week, the benchmark indices showed strong momentum with Nifty closing over 1.10% higher.

“So, watch out for largecaps in automobiles, capital goods, financials and select pharma which are likely to post good Q4 numbers. The RBI monetary policy meet scheduled for April 3 to 5 is likely to keep rates unchanged and, therefore, is unlikely to impact the market, ” says Shrikant Chouhan, Head Equity Research, Kotak Securities

The realty, infra, oil, and gas sectors outperformed, rising more than 2%, while the media index declined the most by 2.7%.

From a technical perspective, the market has formed higher lows on daily and intraday charts, and a long bullish candle on weekly charts which is largely positive.

For trend-following traders, the 20-day Simple Moving Average (SMA) or 73200 would be the decisive level. As long as the market trades above it, the bullish sentiment will remain intact.

At higher levels, the index may find resistance near 74300. Crossing the level of 74300 could help the Nifty achieve the level of 76000 in the near term with minor resistance at 74750 and 75300.

However, the formation may change below the 20-day SMA or 73200. Below that, the index may slip to the 50-day SMA or 73600-72400.

For Bank Nifty, the technical setup is bullish and for traders, the 20-day SMA or 47000 can be an important reference point for short-term trades. On the other hand, below 47000 levels, it could fall to 46500 again.