Markets likely to remain range-bound

Thebenchmark index ended its six-week losing streak and closed. The Nifty gained 1.10 per cent and the BSE Sensex is up by 0.93 per cent. The broader market indices, Nifty Midcap-100 and Smallcap-100 indices, advanced by 0.90 per cent and 0.68 per cent, respectively. Most of the sectoral indices were positive. The Nifty Pharma is the top gainer with 3.50 per cent. The Auto and IT indices gained by 2.74 per cent and 1.26 per cent, respectively. On the downside, the FMCG and Consumer Durables were down by 0.45 per cent and 0.59 per cent. The India VIX is up by 2.68 per cent to 12.35. The FIIs sold Rs24,191.51 crore and the DIIs bought Rs.55,795.28 crore worth of equities in this month.

The Nifty has formed an inside bar on a weekly chart, as we expected last week. The index has taken support at the 24337-347 zone for three days and moved higher. But it failed to cross the crucial 23.6 per cent retracement level of 24652, even after three attempts. It also faced resistance near the previous week’s high and failed to move above it. The index closed at the Anchored VWAP resistance, and above the 20-week average. The index moved in a rangebound for the last two weeks. Now, it has to come out of an inside action for a directional bias.

The US has postponed the trade talks scheduled on August 25th. The deadline for the additional 25 per cent tariffs will be implemented from the 27th August. With the latest development, there is no clarity on the additional tariffs. It is the other way, negative. On the Geopolitical front, the Trump-Putin summit in Alaska ended without a concrete deal or ceasefire agreement on the Ukraine war. However, both leaders called the talks “very productive” and “constructive,” noting that many points were agreed upon, but crucial issues remain unresolved. No clear deal means markets are likely to remain range-bound as traders watch for further geopolitical developments rather than reacting with a strong directional move. The markets are seriously waiting for the outcome of Trump-Zelenskyy meet on Monday. If global commodity prices move sharply, these could drive volatility. Until then, Indian markets may continue their pattern of consolidation and cautious trading. Technically, as the Nifty formed an inside bar, there is no change in the directional bias. The index declined below the 23.6 per cent retracement level of the prior upswing, and formed a major lower high at 25669. If the last week’s positive bias continues, the index may test the 24846-25003 zone of resistance. The counter rallies normally end at 38.2 per cent and 50 per cent retracement levels. The 24846-25003 are nothing but these retracement levels. For the last three days, the index has faced stiff resistance at the 23.6 per cent retracement level. A close above 24652 will be positive and can test 24846. Before that, the 20 DMA is placed at 24757. On Monday, if the Nifty opens with a positive gap, it must sustain above the first hour’s high. The volumes must be higher. Currently, the Nifty is holding six distribution days. If the index declines below the 100EMA of 24590, with an added distribution day, it will be negative and can decline below the prior low of 24314. Tuesday’s low of 24465 is also a crucial support for now. The only positive thing last week was that the index formed higher lows. The daily RSI is hovering around the 40 zone, and the weekly RSI is also in the neutral zone. The daily MACD is about to give a bullish signal. For the second week, the weekly MACD line is below the signal line shows lack of bullish momentum. For the next week, watch the 24337 - 736 range for a directional bias. Above 24736, the immediate target is at 24846. In any case, if the index declines below 24337, it can test the 50-week average of 24191. These are important levels and watch them closely. It is advised to avoid the aggressive position on both sides.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)