Nifty near-term target at 16360 on robust investors risk appetite; mid-, smallcaps to rally in coming days

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We had opened last week with the expectation of a bounce back, but had earmarked 15600 as an important challenge for NSE Nifty 50 to cross. The first break of this mark early in the week, proved to be brief and found distribution thereof, giving bears several opportunities to head lower. However, none of them could dominate the bargain buying interest that kept surfacing on every slippage beyond 15400, acknowledging the significance of 15300 which was in fact the first projected target for the downtrend.

Towards this end, the second leg of the major downtrend, that ideally aims 14000, may have to be put aside for now, and a near term bottom could be said to have been sighted. This surmise will be revisited if there is a pull back again below 15565. Meanwhile, MACD forest is about to signal a positive centerline crossover, while PSAR has given a “stop and reverse” signal, encouraging us to play the upside with confidence. With these in perspective, our near term upside target would be 16360, the 60 SMA, with interim challenge expected in the 15950-16060 region. Let us see how far this construct is supported by the broader market.

After a tumultuous week, when the NSE 500 index managed to close just about a percentage in green on Friday, 79% of the index constituents advanced hinting at a broad based positivity. A quarter the NSE 500 stocks have crossed the wall of worry by breaking above the 5 day high. An 84% advance-decline ratio in the small cap index, which rose 1.76% on Friday, also suggests that risk appetite is robust. But only 18% and 23% of the small and mid cap indices have crossed the 20 DMA mark suggesting that the rally does have more legs in the coming days, before bears smell exhaustion.

First published in Financial Express