RBI, banks hold key to how Nifty will move this week

Special to Firstpost

CNX Nifty (6,144.90): The week gone by was marked by listless activity with the Nifty and the Sensex doing nothing much. Profit booking was apparent in the stocks from the technology and pharma sectors. Technically, the price action in the last couple of trading sessions does not inspire much confidence.

[caption id=“attachment_1195611” align=“alignleft” width=“380”]  Reuters[/caption]

The Nifty struggled to get past the prior swing high at 6,230. After edging above this level, the index closed on a distinctly weak note on Thursday. This is a sign that sellers are still active at higher levels. Until there is a convincing breakout past 6,250, the pressure would be on the downside.

[caption id=“attachment_1195605” align=“alignleft” width=“620”]  Profit booking was apparent in the stocks from the technology and pharma sectors.[/caption]

From a short-term perspective, the index is likely to oscillate between the resistance at 6,250 and support at 6,040-6,060 range. A fall below 6,110 would indicate that a slide to the lower end of the range at 6,040 is underway.

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Until 6,250 or 6,040 breaks, fading the rally or the fall would be the best strategy to trade the Nifty. A breakout past the upper or lower boundary would set the tone for the next directional move in the Nifty.

CNX Bank Index (10,896.50): This index holds the key to what the Nifty does in the near term. The Reserve Bank of India’s policy meet is scheduled on October 29. Quite a few public sector banks too are scheduled to report their earnings next week. Hence, a decisive move in the Nifty and this index is likely next week.

Though the Bank Index has managed to drag itself up from the recent low of 9,500, the recovery has been devoid of either momentum or conviction. The events slated next week would probably infuse some momentum in this index. Resistance at 11,300 and support at 10,200 are the levels to keep a tab on. A move past either of these levels may be used to take trading position in the direction of the breakout.

Bajaj Corp (Rs.239.85): The sharp fall off the Oct. 8 high of Rs.276 was arrested at the support at Rs.210-215 range. The subsequent rally this week is a sign that thre are buyers interested in the stock at lower levels. The short-term outlook is positive and the stock could rally to the resistance at Rs.260-265 range.

[caption id=“attachment_1195603” align=“alignleft” width=“620”]  The sharp fall off the Oct. 8 high of Rs.276 was arrested at the support at Rs.210-215 range.[/caption]

Long position may be considered in Bajaj Corp with a stop loss at Rs.213 for a target of Rs.265. Given the sharp rally in the past few days, buying may be considered in a staggered fashion in order to reduce the average cost of acquisition.

Reliance Communications (Rs.144.75): After a sharp rally, the stock has been in a consolidation mode in the past few weeks. This consolidation has pushed the stock to an area of support at Rs.140-145 range.

Investors may buy the stock with a stop loss at Rs.137 and target of Rs.162. A breakout past Rs.162 would lend momentum to the uptrend and the stock could then rally to Rs.175. Though a fall below Rs.137 would invalidate the short-term bullish view, it would not invalidate the case for a rally to Rs.175. Below Rs.137, the stock could get into a deeper correction before resuming its uptrend.

(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)