Sensex, Nifty end the week with gains despite hiccups; where will Dalal Street head to next?

Despite the fall recorded by benchmark indices during the last two trading sessions, Dalal Street still managed to end the week with gains. S&P BSE Sensex closed at 50,405, up 2.66% from the previous week while the 50-stock NSE Nifty ended at 14,938, up 2.8% from last Friday’s closing. “On a weekly basis, the market closed in the positive territory the market mood was sluggish. A substantial jump in the long term treasury yields and upward activity in the dollar index towards 92, resulted in weakness across the globe,” said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.

Profitable week partly marred by yields

On the charts, Sensex closed below the crucial support levels of 50,500 and Nifty fell below 14,950, according to Chouhan. “On a daily basis, the market has formed the long-legged Doji formation, which is an indication of indecisiveness,” he added. However, Nifty has still not broken the medium-term support range of 14,700-14,800, said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments. Breaking these levels could result in a fall to 14,400-14,500, Hathiramani added.

The market momentum was in-line with the global trend, where most markets were seen slipping owing to the jump in yields in the latter half of the week. “… a surge in the US bond yield towards the end of the week rattled investors across the globe. The week also witnessed changing investor preference from blue-chip stocks to small and mid-caps,” said Vinod Nair, Head of Research at Geojit Financial Services.

What’s ahead for Dalal Street

The long-term structure of the market continues to remain positive, it may face some hurdles in the near term due to concerns over the bond yields, commodity prices and risk of an increase in inflation, said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services. He advises investors to keep tabs on global cues for further hints. On the same lines, Vinod Nair said that the market will now be focusing on how the US Fed reacts in its upcoming meeting as bond yields rise.

Investors are also advised to keep an eye on bond yields. “Any unexpected outcome in the 3/10/30 year US treasury auctions arranged next week could directly influence bond yields and in-turn equity valuation,” said Nirali Shah, Head of Equity Research, Samco Securities. 

From a technical perspective, we could see, Nifty and Sensex touching minimum 14,750 and 50,000 to 14,550 and 49,300 levels, according to Chouhan of Kotak Securities. “On the higher side, 15150/51200 and 15280/51600 would be major hurdles. The focus should be on FMCG and Auto companies,” he added.  Until Nifty gets past the 15,300 level the index is expected to be range-bound and choppy, said Manish Hathiramani.

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