Weekly Market Outlook for 26 Sept to 30 Sept

The week gone by started with a pullback move, but the index was unable to surpass the previous swing highs and formed a ‘Lower Top’. The market participants were waiting for the FOMC meeting outcome and the global markets reaction to the same. The event triggered a sell-off in the equity markets and this time, our markets too witnessed selling pressure and breached its important supports. The index ended the week with a weekly loss of over a percent, but the correction was much deeper in the banking and financial space.

Nifty Today:

The tide has finally turned for our markets which had relatively outperformed the global markets in last couple of months. The outperformance was mainly because of the relative strength in our currency, which had consolidated within a range inspite of the rising Dollar Index. However, post the FED policy outcome the Dollar Index rose sharply and finally the INR gave a breakout from its consolidation and depreciated sharply and have reached 81 mark. So once the currency outperformance was over, our markets witnessed selling pressure and as we have seen in history as well, our markets cannot remain decoupled for a long period in this globalized world. Technically, Nifty has formed a ‘Lower Top Lower Bottom’ structure on the daily chart thus entering a downtrend and the Banking and Financial space which showed outperformance in last couple of months witnessed selling pressure and has ended below its ‘20 DEMA’ support. Apart from the above factors, FII’s position too does not bode well for our markets as they had started the September series with net short positions and have remained short throughout the series. They have now started selling in the cash segment as well and as we have seen in the recent past, their cash market selling along with short formations in derivatives markets usually have been catastrophic for the short term. 

Depreciating Rupee turns the tide for equity markets as well

As far as levels are concerned, 17250 and 17165 are the immediate support levels on short term charts and as the momentum readings on the lower time frame chart are in oversold zone, a pullback move from around these supports could be seen. However, on the higher side 17540,17630 and 17700 would be the hurdle and markets could face selling pressure on pullback moves. On positional charts, until the data changes, one should continue to follow the trend and major support/target in this correction is placed around the ‘200 DEMA’ which is around 16880.