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Nifty - Positive momentum is expected to continue along with Intermittent Consolidation and Correction

As suggested the previous week the Nifty 50 Index entered in a wide range consolidation range, and it happened because it oscillated a wide range of 510 points.


It was yet another strong quarter for India Inc. as most companies reported better-than-expected numbers for the three months ended December, triggering further upgrades in earnings. Earnings of companies that are part of the Nifty 50 grew by 17% year-on-year (YoY), against expectations of an 11% growth.


However, the overall growth was slower in the December quarter, compared with the September quarter.


Despite the good show by companies, the earnings upgrade-to-downgrade ratio turned weaker for FY25. While for 58 companies earnings estimate was upgraded by over 3%, 84 companies saw an earnings downgrade of over 3%.


“The earnings upgrade/downgrade ratio of 0.6x was the worst since 3QFY22. Nevertheless, we expect to see a double-digit growth in earnings for both FY24 and FY25.


As well as we expect net profits of the Nifty 50 index to grow 18.9% in FY24 and 10.2% in FY25.


Post Market Weekly Analysis


The Nifty 50 weekly Index opened at 21800 touched the high level of 22068 and slipped down to 21530 before closing at 22040. So the benchmark index oscillated in a range of 510 points over the previous week's trading sessions, finally closing with a gain of 258.20 points, i.e. in percentage term (-1.19%) on a week-on-week basis.


Nifty 50 Index Monthly Chart


The monthly chart of the Nifty Index is still bullish and once again reaching near the previous all-time high, where a double top was formed earlier. The million-dollar question is, will it break this time and will make a new high, Shh.. Only the market can tell us to just wait and watch.


Nifty 50 Index Weekly Chart

The Weekly chart is standing with a very bullish candle, but both bulls and bears are waiting, who will take the lead. There is indecisiveness in the market regarding what we need to do at this height. Bullish Market participants have made their positions to 23000 in options, and 22000 is also standing at major support. Let us see, what will happen this week. All SMA is supporting as of now.


Nifty 50 Index Daily Chart

Bulls are still in charge of the stock market. From the last four trading sessions, they are making their positions very strong and pushing the momentum of the market high, but it seems when the market closed above 22000, market participants were confused if they should book profit or wait till this rally ended


Nifty 50 Weekly Fibonacci Chart Status

22000, the psychological level has been surpassed by the market and the Fibonacci series is still maintaining its range. In the coming week, we may see a major consolidation before the market can break the double top of its all-time high. We could end up the week within the range of 1 and 0.618, either side breakout will make the range more wide.


Nifty 50 Index Weekly Chart -with Technical Indicators


RSI Indicator Pattern

The weekly RSI stands at 71.18; it stays neutral and does not show any divergence

against the price.


MoneyFlow Indicator

This weekly indicator is at 83.82 which is its overbought zone. And it seems that it is looking for a bearishness in the market from this level.


MACD Indicator Pattern

The weekly MACD is bullish and stays above the signal line. But the narrowing Histogram tells us consolidation ahead.


FII's & DIIs Cash Monthly Activities


Foreign institutional investors were net sellers during the last week due to a spike in US bond yields after higher-than-expected CPI inflation, which seems to have capped the market upside to some extent.


The selling from FII may continue if the bond yields stay elevated in the coming weeks.


The market would have already hit a new high if FIIs had also buyers last week.


FIIs have net sold Rs 6,238 crore worth of shares in the cash segment, taking the total current month's outflow to Rs 13,920 crore, whereas domestic institutional investors bought Rs 8,732 crore worth of shares during the week, taking the total to Rs 17,400 crore for the current month.


The US 10-year treasury yields settled the week at 4.28 percent, against 4.17 percent in the previous week, which has been rising since the beginning of February while the US dollar index retreated from 104.97 before closing the week at 104.28 against 104.11 levels in the previous week, and it was at 100.99 on December 27, 2023.


Outlook for the NIFTY 50 Index for the Coming Week


A positive end to the Q3FY24 earnings, falling inflation and buying in most of the key sectors (banks, technology, oil & gas, energy, auto), and consistent DII support were some of the primary driving factors. In addition, there is a feeling that this may be the beginning of a pre-election rally, especially after pre-poll surveys by a couple of agencies.


Hence, overall, the positive momentum is expected to continue in the coming week, too, along with intermittent consolidation and correction, with a focus on key takeaways from minutes of FOMC and MPC policies, US bond yield action, and global cues.


India VIX:

The previous week India VIX closed at 15.22. it touched a high of 16.57 and a low level of 14.90, It lost on a closing basis by -0.2250 (-1.46%) on a week-on-week basis.


India VIX failed to sustain above the 16.5 zone again and closed the week down by 1.46 percent at 15.22 levels, giving comfort to bulls. If it crosses 16.5 on a closing basis, then volatility may increase and bulls may turn uncomfortable.


Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be 22000, followed by 21900 and 21500 levels.


Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be the level of 22126, followed by 22280 levels.


Crude Oil

Oil prices extended their upward journey for yet another week after rebounding from the 200-day EMA (exponential moving average), with Brent crude futures closing at $83.47 a barrel, up 1.6 percent for the week amid escalating geopolitical tensions in the Middle East and OPEC members' compliance with supply cuts outweighed the gloomy demand outlook by the International Energy Agency (IEA).

Oil prices traded above all key moving averages and are very close to a long downward-sloping resistance trendline as this seems that decisively surpassing the said trendline may bring some bullish bias in the prices, otherwise, the volatility may be sustained.


Important Upcoming Weekly Activities


FOMC Minutes

Globally the market participants will look for cues from the FOMC minutes of the January policy meeting, scheduled on February 22 as there have been mixed opinions from economists about the beginning of the Fed funds rate cut trajectory.

Some are expecting the rate cut towards the end of the first half of CY24, while others are seeing the same in the second half of 2024, as they keep assessing the direction of the US economy and inflation data.


Global Economic Data

Further, global investors will also take cues from the speeches by several Fed officials including Bostic, Bowman, Jefferson, Harker, Cook, Kashkari, and Waller, about the next action by the Federal Open Market Committee (FOMC).

Apart from that, the participants will focus on manufacturing & services PMI flash numbers, US jobs data, and Europe's January inflation.


Monetary Policy Committee meeting minutes

The RBI policy meeting minutes, which are scheduled on February 22, will also be closely tracked by the market participants to get any cue about the timing of a change in policy stance to neutral from accommodative currently.

The CPI inflation in January came in at 5.1 percent against 5.69 percent in the previous month, while RBI sees FY24 inflation at 5.4 percent and economic growth at 7.3 percent.


Domestic Economic Data

Further, on the domestic front, HSBC Manufacturing & Services PMI Flash numbers for February will be released on February 22, while bank loan and deposit growth for the fortnight ended February 9 will be announced on February 23.


Foreign exchange reserves for the week ending February 16 will also be released on February 23.



Technical Analysis


Technically, the Nifty 50 looks strong as the index sustained an uptrend for the last four days and closed above its psychological 22,000 mark for the first time on a weekly basis, with healthy volumes.


The initial sessions of the coming week will be crucial to gauge market reactions around the 22,100 - 22,150 zone. A continued upward trajectory beyond this range could signal the start of the next bullish phase, potentially opening doors for the 22,380 - 22,500 zone


The immediate support lies around 21,950 followed by 21,800, with crucial support residing in the 21,550 - 21,500 zone, from where prices rebounded last week.


Reading Current Option Data


Options data indicated that the 22,000 is expected to be crucial for further direction in the Nifty 50 in the coming week, with immediate resistance at 22,100 and then 22,300, while the support lies at 21,900.


On the weekly options data front, the maximum Call open interest was seen at 23,000 strikes, followed by 22,600, 22,800, and 22,100 strikes, with meaningful Call writing at 22,100 strikes, then 22,800 strikes.


On the Put side, the 21,000 strikes owned the maximum open interest, followed by the 22,000 strikes and 21,700 strikes, with writing at 22,000 strikes, then 21,000 strikes.



Participant Wise Final F&O Weekly Summary


FII's, PRO, and Clients F&O Summary by Segment

1). FII's positions as of the last trading day:

2). PRO's positions as of the last trading day:

3). CLIENT's position as of the last trading day:


Summary - Overall


The Nifty 50 Index crossed the physiological level of 22000 and was also able to close above that.


A sustainable upmove will take place only after the Nifty 50 Index manages to cross above the 22100-22200 zone.


Any good news can push the market to reach once again, its all-time hurdle, but to cross its double top formation, if needs a decisive move. above that.


Minor retracements can not be ruled out.


It is strongly advised to avoid large leveraged positions.


While adopting a highly selective approach, vigilant protection of profits is also advised at higher levels.


Thanks for reading.

Keep Trading

Stay Invested


Regards,

Neeraj Bhatia

(Managing Director)    


Disclaimer: I am a National Stock Exchange-certified Technical Analyst and Chartist but not a SEBI-registered analyst, so consult your financial advisor before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.

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