The Nifty50 closed 240.85 points higher at 16,871.30 on Monday, which is about 100 points shy of its 200-day simple moving average (SMA).
The benchmark Nifty50 advanced for the fifth day on Monday with cumulative gains of 6.4%, trimming its year-to-date loss to less than 3% from a decline of 8.6%. It is now close to crossing the crucial support level it had broken on February 23. Even though the overall trend looks positive, strategists do not expect any big jump from here. The Nifty has managed to close above the crucial 200-day exponential moving average (DEMA) of 16750. The DEMA indicates positive momentum when the level goes past the average. Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services, says: “The positive momentum in the market is likely to continue till the peace talks don’t fail and commodity prices continue their downward trend.”
The Nifty50 closed 240.85 points higher at 16,871.30 on Monday, which is about 100 points shy of its 200-day simple moving average (SMA). The index is currently trading at 2.5% and 3.1% lower to its 50 and 100 SMAs, respectively. Market participants believe that the short-term outlook for Nifty is likely to be volatile and upside to be capped at 200 DMA. On the downside, the biggest support is seen at the last week’s low at 15,671 mark. Additionally, the Nifty’s options data for March series suggests the index is likely to trade between the 15,500-17,000 zone.
The 200-day moving average acts as a major support level since the level has been crucially monitored by most traders and a lot of stop losses get triggered at this point. Moreover, it is the threshold level for many traders to hold on to their positions. On a closing basis, February 23 saw the Nifty50 breaking the support level after July 17, 2020. “In the current market movement, all eyes are set on the US Federal Reserve as inflation fears intensify and volatility is likely to ride high as the war continues to command investors’ attention and most importantly, there is little hope that this week will bring any peaceful solution to the conflict,” said Prashanth Tapse, vice president (Research) at Mehta Equities. “Dalal Street could win only if the Nifty is able to move above its biggest hurdles at the 16,959 mark and the confirmation of strength arises when it closes above the crucial level,” added Tapse.
Lenders and financial stocks surged on Monday, after the Reserve Bank of India (RBI) lifted all restrictions imposed on HDFC Bank over the weekend. HDFC Bank, which enjoys highest weight on the Nifty50, after Reliance Industries and Infosys, surged as much as 3.3%, followed by State Bank of India, which is up by 3.2%. Another heavyweight – ICICI Bank – rose 2.7% to close the session at Rs 696.15 on the NSE. While HDFC Bank boasts of the third highest weight of 8.51% on Nifty50, ICICI Bank has a weight of 7.03% on the index as of end of February.
Meanwhile, shares of One97 Communications tumbled 12.21% to close at Rs 680.40 on the NSE after the RBI asked Vijay Shekhar Sharma-promoted Paytm Payments Bank to stop opening new accounts amid “material supervisory concerns” observed in the bank.
“Even though, the markets are not expecting any further volatility than what we saw in the last month, it is very unlikely to witness a sharp upmove unless the banking and financial stocks take the lead. The outcome of the US Federal Reserve is also very critical. Any increase in the rates would further intensify the selling by overseas investors, thereby capping any meaningful rise in benchmarks,” said Rahul Shah, senior VP, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services.
