Nifty trend for Friday
When was the last time we had seen Nifty ending in red for two consecutive trading sessions? I know it’s hard to recall but this statement gives us an indication that we are very much used to bullish close these days. As a matter of fact, Nifty had witnessed two consecutive red on November 29-30, 2020.
On Thursday, Nifty started off the session with a gap-up on the back of strong leads from Wall Street. However, the market participants used this gap-up to take the profit off the tables. This was evident from the fact that the opening level was almost the high point of the day and as the day progressed, bouts of volatility were witnessed on the eve of the first weekly options expiry of January 2021, and in the end, Nifty erased almost 133 points from the day’s high. Despite profit booking and weekly options expiry, the index did not breach its prior bar low as well as 5-EMA on a closing basis. This clearly suggests that the bulls are just resting for the time being and this is a routine correction. We can get confirmation of this from the fact that the market breadth was extremely in the favour of advancers as 1,183 stocks advanced against 709 decliners. The broader indices had a gala time as Nifty Mid-cap and Small-cap surged 1.45 per cent and 1.37 per cent, respectively.
One of the key takeaways for the bears was that despite opening at the day’s high, Nifty had closed near its day’s low. Besides, after a long time, Nifty’s close and low had just a difference of 14 points. In the recent past, we have seen the other way around that either after a correction, the bulls grab the opportunity with both hands and buy the dips. Even in the last trading session i.e. Wednesday, despite the gloom & doom news, Nifty recovered 100 points from the day’s low. So, is this a warning bell? Yes! One needs to adopt some cautiousness and maintain a strict stop-loss and at the same time, keep monitoring the distribution day count. A rise in a distribution day can halt the uptrend and the current distribution count stands at three.
On the upside, the zone of 14,240-14,280 would continue to act as a strong resistance zone while on the downside, the zone of 14,000-14,070 is likely to act as an immediate support level. Going forward, Q3 earning season would take the centre stage with IT bellwether TCS scheduled to announce its earnings on Friday. The outcome of the earnings could dictate the near-term trend of the index. Nifty IT index has been a major contributor to the index and any disappointment in the earnings from the IT sector could lead to gloominess among the investors’ camp.
On the fundamental side, Nifty PE is at 38.90 and the price-to-book value is at 4.01. Usually, the price-to-book value has reacted lower whenever it had attempted to reach a level closer to 4 since the global financial crisis of 2008-09.