Analyst Somesh view - Closing Comments Jan 14

img

Nifty formed a bullish candle which resembled a Hanging Man pattern, for the second consecutive session,on the daily charts.

Nifty continues forming higher lows from the last six sessions but negated the formation of higher highs of the last fifteen trading sessions.

Nifty opened lower at 14550 and hit an intraday low of 14471, but gained strength amid volatility in the afternoon and touched the day's high of 14617 before signing off the session at 14595, up 30.70 points.

Nifty closed at a record high for the fifth consecutive session following strength in the afternoon amid volatility. Index heavyweights Reliance Industries, HDFC Group, ITC, L&T and TCS supported the market but the selling in metals, select technology and banking & financials capped the gains.

Markets remained range-bound for yet another session and ended marginally higher. Initially, the profit taking in the IT majors pushed the benchmark lower but buying in the select index majors especially from energy, capital goods and FMCG space gradually pared all the losses. Consequently, Nifty index ended higher by 0.2% at 14596 level. On the sector front, all the other indices ended on a flat to positive note wherein Capital Goods, Oil & Gas and FMCG were the top gainers.

We may see further consolidation in the index ahead and it would be healthy for markets. The recent rise in volatility on the stock-specific front is on expected lines and we expect this trend to continue during the earnings season. Participants should maintain extra caution in the selection of stocks now and focus more on risk management.

Nifty continued to witness buying on intraday dips, which once again resulted in a Hanging Man kind of formation, with a dominating lower shadow over candle body. However, advance-decline ratio remained negative for the second session in a row, as it slightly tiled in the favour of bears.

Last four trading sessions of indecisive formations with narrow trading ranges are hinting at a distribution phase at higher level, which should eventually pave the way for a sudden and sharp cut in the near term. Hence, advised traders to be cautious and maintain tight stop below 14400 level, as a breach on the closing basis may trigger a short-term downswing.

Traders should remain cautious and focus on stock-specific opportunities rather than waging directional bets on the index.

Among sectors, metal index lost 1 percent, while buying witnessed in the energy, auto, FMCG and pharma names.