Index trend and stocks in action December 05, 2019

The Nifty opened the session on a negative note, owing to comments from the US President, Donald Trump, indicating that a trade deal with China may not be reached until next year. However, after an initial knee jerk reaction, the index attempted a pullback but it was met with selling pressure at higher levels. Thereafter, it started to drift lower and registered a low of 11,935 levels in the afternoon session. It seemed the index is heading for losses for the fourth day straight. However, the news of a possible breakthrough in the US-China trade deal completely changed the tone in the latter half. The index recovered over 100 points from the low point of the day and ended the day with gains of 49 points at 12,043 levels.

The price action of the day formed a sizable bullish candle that resembles a piercing line pattern. The key takeaway from Wednesday’s sessions was that although the Nifty showed some corrective intent, it manage to defend its short term support 20-DMA on closing basis, which stands at 11,981 levels at present. Also, since October 9, every fall in the index is limited to 2 or 3 days only. The corrective action, which was witnessed over the past couple of days, again lasted up to three days this time around.

Despite the above evidence, we would say that the Nifty is not yet out of the woods as the index has to get past the Laxman Rekha of 12,100 levels. Also in today’s session, all eyes will be on RBI. The markets have already discounted the 25bps points cut, given the slowdown in economic growth. However, market participants will be all ears to the commentary on the future trajectory.
 
Overall, we expect today’s session would be highly volatile on the eve of weekly expiry. Moreover, the RBI monetary policy outcome will also add to it. It would be a litmus test for the Nifty. All eyes would remain on it to see if it can defend its 20-DMA. If it holds and moves above the 12,100 mark, we could see 12,240-12,300 levels in the short term or, else, a consolidation between 11,800-12,050 levels could be seen.

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