Nifty: further pullback above 5825

Nifty traded with bearish bias till Thursday and gave a nice pullback on Friday and trimmed the weekly losses to a very reasonable level of about 1.25 per cent. If Friday's recovery is to continue technically, it needs to close above Friday's high. If it happens, Nifty would get into short term bullishness once again. Nifty traded below 200 DMA during the week, but by Friday, it closed marginally above 200 DMA. Further, as long as 50 DMA is above 200 DMA, long term bullish persists. Hence, Nifty is in medium and long term bullish trend and short term trend too would become bullish once it closes above 5825. Technicals apart, Monday's RBI policy would provide further direction to the market. Falling inflation has raised the hopes of a rate cut. However, depreciating rupee is a big threat for macro economics. Nifty earnings are slowly inching up and by end of the calendar year it can be expected between 5400 and 6900 based on pessimistic and optimistic valuation. Hence, not much of downside is seen based on fundamentals and any sharp fall due to extraneous factors would provide a good opportunity to buy. However, main cause for concern from fundamental point of view is the depreciating rupee which could widen current account deficit which would affect the macro position of the economy. In a pre-election year, politics could prevail over economics which would not be liked by major market participants. Further, falling rupee would dissuade FII inflows too. However, based on the present fundamentals, as stated above, there is not much scope for downside and any reasonable downside would make our market fundamentally attractive as it would get into a zone with reasonable margin of safety. Further based on the chart pattern, Nifty is bullish and would attempt a new high as long as it maintains above 5750. Hence, investors with medium and long term outlook can buy on decline while short term traders may wait for Nifty to close above 5825. Investors / traders should devise their strategies keeping the above levels in mind. Investors may follow SIP route in respect of quality stocks or value Investing' principle with higher margin of safety and traders should be ever vigilant tracking short term movements. For the coming week, Nifty spot is expected to face resistance at 5885, 5965, 6040 and find support at 5735, 5660, 5585. Nifty, presently in bearish, would get out of short term bearishness only on a close above 5825.

Advice for Traders Friday's strong pullback has raised the hopes of a further action. It all depends on RBI policy and any rate cut could change the sentiment. Hence, if Nifty closes above 5825, long positions can be attempted with a stop loss of 5725. On the other hand, if it fails to clear the hurdle of 5825 and covers the Friday's gap, further downside too can't be ruled out. Weekly open level is very important for the entire week. Short positions may be avoided as long as it maintains or closes above weekly open and vice versa