Weekly Market Outlook for 30 Jan to 3 Feb

Nifty started the week gone by near the 18200 levels which was the higher end of the recent trading range of 18250-18770. However, the index witnessed selling pressure on the January series F&O expiry session and breached 18000 level. But it was not over yet, the last trading session witnessed capitulation across the markets as the index breached 17770 swing low support and it corrected towards 17500 mark. Nifty finally ended the week around 17600 with a weekly loss of over a couple of percent.

Nifty Today:

It was a tough week for the bulls but the markets finally witnessed a breakout from the long consolidation phase to determine the next trended phase. Unfortunately, the markets broke the important support level of 17770 which indicates a short term downtrend. This resulted in a sharp sell-off across in Friday’s session which perplexed market participants. To be honest, it was not expected by us as well as the global equity markets were positive off late and the Dollar Index too has been trading at lower levels. However, on the F&O expiry day, the FII’s rolled over their short positions in the index futures segment and have been sellers in the cash segment too. Their selling in equities along with short formations in the index futures segment have generally been catastrophic for our markets and this seems to be the leading factor for the correction in last couple of sessions. The important support range of 17750-17800 has been breached and now it could become a resistance on pullback moves as the daily momentum readings are also in sell mode. However, the readings in the hourly time frame are in an oversold zone and the volatility index surpassed 17 which indicates that there could be some sharp moves on both the sides resulting in increased volatility ahead of the Union Budget.

Market witnessed sharp sell-off as Nifty breached important supports   

Nifty has re-tested its 200 EMA (around 17550 now) after almost 4 months and thus 17550-17500 would be seen as an immediate support zone. Below this, the Nifty could continue to slide towards 17400-17350. The short term trend is down until changed and hence, traders should be cautious and avoid aggressive positions.

Nifty & Bank Nifty Levels: