Any decisive breakout above 16,400 might open upside towards 16,800: Nilesh Jain

A volatile week for Indian markets, but benchmark indices closed flat to positive. What led to the price action on D-Street?
The bulls made a strong comeback after forming a triple bottom near the 15,740 level. However, the pullback was very short-lived as the Nifty once again faced stiff resistance around 16,400 levels.

As highlighted earlier, the market had gone into extremely oversold territory and a pullback was very much due and we have witnessed the same.

The Nifty tested 16,400 levels which acted as a wall, and now a breakout above the same will change the short-term sentiment of the market.

We are approaching the monthly expiry next week. How is the market likely to pan out and any levels that traders should watch out for on Nifty and NiftyBank?
The markets are likely to remain extremely volatile ahead of the F&O expiry in the coming week. The derivative data indicates fresh put writing at 16,000 strikes which holds the highest open interest, followed by 15,800 strikes, whereas fresh call writing at 16,300 and 16,400 is restricting its upsides.

The overall setup hints at a major breakout from the range of 15,700-16,400 in the coming week and whichever side it will break, we can expect to follow up move of 300-400 points in that direction.

Bank Nifty also respected its psychological mark of 33,000 and witnessed a strong pullback from the same. Now, the major hurdle is placed at 34,800, and a breakout above the same will change the trend and open the upside for the 36,000 mark.

After Friday’s bounce back do you think that we might have hit the bottom? When can bulls take over D-Street with conviction?
The markets snapped a five-week losing streak and formed a bullish candle on the weekly scale. This looks like a typical bear market pullback which is unlikely to sustain and might get sold into. Hence, as long as the Nifty trades below 16,400, one needs to adopt a cautious approach in the markets.

Any decisive breakout above 16,400 might open further upside towards 16,800, a 200-day exponential moving average resistance.

Sectorally, IT stocks fell the most. What led to the price action? We saw JPMorgan downgrade as well. Should investors trim their positions (go underweight) in IT?
The Nifty IT index continued its losing streak for the seventh consecutive week and also gave a structural breakdown. Although, the momentum indicators and oscillators have reached extremely oversold territory, which hints at some pullback that should be used as an exit opportunity.

From a short-term perspective, there is some more pain left in the IT pack and it’s better to stay away for the time being and shift the focus toward Auto, FMCG, and Pharma stocks.

Auto stocks topped sectors – what is the price action, and will the momentum continue in the coming week? Any stocks that are looking strong on charts?
The Nifty Auto index surpassed its 200-day exponential moving average, which shows inherent strength in the index. The momentum oscillator MACD has given a fresh buy crossover which hints at a further upside in the short term.

From a stock-specific,

came out with a strong set of numbers this week and also gave a technical breakout from its six-month falling trend line.

The overall structure looks good for 140/148 levels and support is at 124. Apart from that,

also reclaimed its 200-DEMA and looks positive for 2,800 levels where support is at 2,470.

FIIs on a selling spree. They have pulled out more than Rs 42,000 cr from the cash segment of Indian equity markets so far in May. Time to trim positions from stocks in which FIIs hold maximum stake.
FII has been a consistent seller in Indian equities in the last few months. The bulk of selling was seen in technology and banks.

With the rise in the global interest rate and an uptrend in DXY, emerging markets are expected to be under pressure for the next few months.

In such a scenario, there is a high probability FIIs could witness further redemption pressure in the Indian market as India is one of the top-performing markets in the world on 12 months trailing basis.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)