Nifty closed above 11750 and formed small bodied bullish candle on the daily chart as closing was higher than opening level, while there was a bearish candle formation on the weekly chart as it lost 1.3 percent for the week.
Nifty opened higher at 11727 and drifted lower to hit an intraday low of 11667 in initial hour of trade, but immediately rebounded and stayed strong to touch a day's high of 11789. Nifty settled at 11762, up 82 points.
Nifty recouped some of the previous day's losses and remained higher for major part of the session backed by positive European cues, and buying in banking & financials, metals and pharma stocks.
FPIs bought equities worth USD649 mn over the past five trading sessions while DIIs sold USD 523 mn worth of equities in the same period. Going into the next few weeks, the key events are the US elections, progress on the US fiscal stimulus and earnings announcements from Indian corporates. Valuations are not attractive. Hence, investors should trade with a cautious bias as after the swift rise in markets, there could be sharp corrections. Risk could be resurgence of Covid-19 in India.
However, last Thursday's bigger cut appears to have catapulted the near term trend in favour of bears. Hence, rallies may not sustain but remain vulnerable for a sell off and as long as Nifty sustains above 11661 level then it can make an attempt to recoup some of the losses by rallying into the zone of 11843/11885 level.
It appears to be the day of consolidation on the bourses as Nifty remained in a range of 120 points before signing off the session with a small bullish candle which resembles an indecisive Spinning Top.
If the index breaches 11661, then it shall not only resume the downswing with initial targets present in the zone of 11500/11400 level but also confirm a multi week top around 12025 level.
Rallies may not sustain but remain vulnerable for a sell off and as long as Nifty sustains above 11661 level then it can make an attempt to recoup some of the losses by rallying into the zone of 11843/11885 level.
Traders to avoid positional longs but should consider shorting rallies on early signs of weakness.
Except IT other sectoral indices ended higher led by the metal, bank and pharma. Midcap and Smallcap indices rose 1 percent each.
-Someshwar, Technical analyst, Equidius Research