• Last week, however, easing inflation data provided some respite to equities, however, continuation of accommodative stance by major central banks weighed on global sentiment, due to which bears dragged domestic equities as well.
Due to sharp volatility, Indian markets ended last week on a bearish note, with the Sensex slipping below the 61,400-mark and the Nifty 50 slipping below the 18,300-mark. While easing inflation data provided some respite to equities, continuation of accommodative stance by major central banks weighed on global sentiment, due to which bears dragged domestic equities as well. The rupee depreciated for the second week in a row, while foreign funds (FIIs) retreated. In the coming week, 10 key factors could play a role in driving sentiment in Sensex and Nifty 50.
On Friday, the Sensex closed at 61,337.81, down 461.22 points or 0.75%. The Nifty 50 closed at 18,269, down 145.90 points or 0.79%. Midcap and Smallcap indices broke more than 1 percent. Sectoral indices witnessed a broad-based selloff, with IT, healthcare, auto, banking, capital goods and consumer durables shares leading the decline.
In the week ended December 16, the Sensex fell at least 1.4%, while the Nifty 50 declined over 1.2%.
Talking about the weekly performance, Vinod Nair, Head of Research, Geojit Financial Services, said, "The volatility in the markets this week was dictated by the release of favorable inflation numbers, which were offset by accommodative decisions by major global central banks US CPI inflation eased to 7.1% in November, while India's retail inflation eased sharply to 5.88%, well within the RBI's tolerance band."
He said, however, that the Fed surprised the market by maintaining its dovish tone, as investors were expecting a softer outlook after the release of better-than-expected inflation numbers. After the Fed, the BoE and the ECB raised their interest rates by 50 bps each, maintaining their dovish stance in combating inflation. While the selling was broad-based, fears of a slowdown in global economies dragged IT stocks in the domestic market.
"Lack of major triggers will propel the domestic market to follow its global peers in the coming week," Nair said.
1. Nifty 50
Nifty has formed a lower top lower bottom on the daily chart, which is a bearish signal for the short term, said Apoorva Sheth, Head of Market Perspectives, SAMCO Securities. On the daily chart, the index closed below its 9 and 21 day exponential moving averages and on the other hand, the RSI has moved below the 50 level with a bearish crossover.
On technical grounds, support for Nifty is placed near 18100 and any move below this will extend the downside further towards 17900 levels, said Sheth. Similarly, on the higher side, 18500 will be an immediate resistance followed by the 18650 level.
ICICI Direct expects Nifty to extend its corrective phase with strong support near 17900 levels, while the last two-week high of 18700 will act as a key resistance.
According to Ajit Mishra, VP Technical Research, Religare Broking, apart from weak global cues, continued profit-taking in banking indices could lead to further downside and Nifty may test 18,000-18,100 zone soon. On the upside, 18,500-18,750 will act as a hurdle. Since all sectors are trading largely in sync with the benchmark, participants should plan their exits in profitable trades and be selective about new positions.
On Friday, the Nifty 50 closed at 18,269, down 145.90 points or 0.79%. Its weekly decline is more than 1.2%.
2. Bank Nifty:
On Bank Nifty, Kunal Shah, Senior Technical Analyst, LKP Securities said, Bank Nifty index saw profit-booking at higher levels as global markets witnessed fresh selling post Fed event. The index remains in sell-on-rise mode with resistance visible in the 43,600-43,800 zone. To resume its uptrend, the index needs to cross 44,000 level where highest open interest has been created on call side. On the downside, the immediate support for the index lies at 43,000-42,800 area and if breached, it will further increase the selling pressure.
On Friday, the Bank Nifty closed 278.70 points or 0.64% lower at 43,219.50. Its weekly decline is more than 0.4%.
3. Rupee:
The Indian currency closed lower for the second consecutive week against the US dollar on increased demand in the greenback from oil and other importers. Except on Wednesday when the rupee found support following better-than-expected US inflation data, the local unit tumbled for the entire week between December 12-16.
On Friday, the rupee closed at Rs 82.87 per dollar as against the previous day's close of Rs 82.76 per dollar. Overall, the domestic currency declined by 0.7% against the greenback this week.
For the coming week, ICICI Direct in its report said that the rupee is likely to face a strong resistance near Rs 83.30 per litre.
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