Sensex, Nifty scale all-time high: Three key factors that charged the bulls last week

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It was a historic week for the market where bulls took Nifty above 17,300 and Sensex above 58,000 for the first time with the best weekly gain in seven months. The ferocious rally can be attributed to positive global cues, strong FII flows, and the weak dollar. The market is under the strong grip of bulls and there are no signs that bulls want to lose their control soon. The beauty of last week’s rally is that it was broad-based with a gain in quality stocks and there was no euphoria kind of situation.

Technically, Nifty ended the week with a bullish white long marabozu candlestick formation that may lead to a further upside where 17520 is an immediate target while 17700 is the next target level. Though the momentum indicator RSI is trading in overbought territory on both daily and weekly time frames, the market can remain overbought for some more time. On the downside, 17200-17140 is an immediate demand zone to buy any dip while 17050-17000 will be the next support area.

If we talk about derivative data then FIIs’ long exposure in the index future stands at 65% whereas they have added some long positions in index options which indicate that the market is not overheated on the derivative front and hedged for any sharp dip that may restrict any immediate fall. PCR stands at 1.35 level which is also at a very comfortable level.

If we talk about OI built up for next week’s expiry then there is no major built up before 18000CE which has an open interest of around 52.5lac whereas 17300CE and 17500CE both have around 29lac of open interest. On the downside, the open interest is evenly distributed between the 17200-17000 zone.

The Bank Nifty still remains a puzzle that has unfinished business to test its new high where 37200-37750 is an immediate resistance zone but it has the potential to move towards 40000.mark

Going ahead, we are going to have a truncated week as the markets will remain closed on Friday on the occasion of Ganesh Chaturthi therefore the market will react to IIP numbers as the they will be released on Friday.

Global cues will be important because we are outperforming the global peers and we may continue to outperform if there will be no major negative surprise. The US market will remain closed on Monday on account of Labor day and there was not much movement in Friday’s trading session, therefore, we can expect some consolidation in our market in Monday’s trading session but if Nifty consolidates then Midcap and Smallcap stocks may outperform. Covid cases are rising in the USA and in some other countries and that may be a cause of concern for global markets. Movement in USDINR and FIIs’ behavior will be important to watch out for as FIIs’ flow is playing an important role in the current pace of the market. Crude Oil prices will also have some impact on the market where $74 is an important hurdle for brent crude; above this, we can expect a move towards $76.

(The writer is head of research at Swastika Investmart; views expressed are personal)