The first resistance level indicated last week was 23398, followed by a highly crucial resistance zone at 23783. The major support level to watch on the downside was 23079. Although the market broke and closed above the 23398 level in the early days of last week, an abnormal surge in US bond yields and Brent crude led to severe selling pressure the very next day, culminating in a test of the 23079 support level. On Thursday, this 23079 level was lost during the closing as per the new CAS system. However, the next day, Friday, Nifty closed at the 23140 level.
Financial sector stocks, which had been holding the market up in recent days, faced heavy selling pressure amid fears that proposals to reduce insurance commissions would cause revenue losses. The resumption of talks between the US and China raised hopes in global markets, but it also casts a shadow over India’s dreams of becoming a global manufacturing hub. Another major event last week was the listing of the National Stock Exchange (NSE), India’s largest and globally the sixth-largest exchange. It is fair to say that the market gave a very lukewarm response to the NSE listing. Last week, NSE closed at 1792, very close to its issue price of 1785. The high of 1878 reached on the first day remains its highest level to date. As expected, NSE, which had been the ‘darling’ of traders in the unlisted market for over 10 years, failed to maintain that heat upon listing. In the pre-IPO markets, NSE had been trading at levels of 2000-2300 for the past year or so. The lukewarm NSE listing serves as an eye-opener, teaching retail investors that they should avoid trading in such unregulated markets. At this juncture, I only wish to remind the investment community to apply basic common sense: the traders providing these shares to eager buyers before the IPO belong to more “informed circles,” and investors should think about why these informed players are choosing to sell.
Now, let’s examine the key events in the coming days: the bank strike from the 28th to the 30th, the September futures settlement on Tuesday the 29th, the auto sales figures on October 1st, and the holiday the following day (Friday). Globally, conflicting news is emerging regarding whether peace talks with Iran are happening or not. For us, the biggest news to watch out for is whether a scenario is emerging for crude prices to fall. However, if the geopolitical situation worsens, the market will plunge into even heavier selling.
Coming back to Nifty, the first resistance level to watch in the coming days is whether it can manage a close above 23171, which sits just above last week’s close of 23140. If this fail, the next downside level to watch will be 22956. Losing this level opens up the possibility of a nearly 900-point correction from current levels, potentially extending down to 22182.
If the index manages to close and sustain above 23171 in the coming days, let’s look at the subsequent moves. The 23245 level is the first resistance line to watch; if it closes above this, the next resistance zone Nifty needs to break and close above is 23489. If it can break out and advance beyond 23783 on a closing basis, it will open up the possibility of a bull wave in Nifty. The 24278 – 24772 levels will then be the ones to watch.
As mentioned last week, are the bulls preparing to scale the massive wall of resistance standing in front of them? At the same time, if the bears have managed to pin the market at lower levels and force a downward close for 7 consecutive weeks, they are fully prepared as well. We can undoubtedly say that we are heading towards a climax move.