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Nifty may face resistance around 5,150-5,265

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Nifty may face resistance around 5,150-5,265 range in the coming week

 A year ago, month of September was an excellent month for trading in the Indian markets. The Sensex and the 50-share Nifty index were in touching their all time highs. Indian markets registered double digit gains, making it one of the solid months of 2010.

Exactly a year later, in September 2011, Indian markets are struggling to find their base, and the amount of pessimism at these levels is way too high.

The last week, was a very short one (in terms of the number of trading days), however the markets registered some excellent bounce, making it a 3 on 3 for the week. The bounce was much anticipated and much needed for the markets, looking at the kind of battering the stocks had faced for the couple of weeks before.

Talking about the sectoral performances, two sectors which have witnessed strong price action in this leg of rally were the metals and realty sectors. If we take a close look at the statistics below it will show the amount of short covering witnessed in these two sectors.

The laggards, however, have been the defensive space, FMCG, CG and CD. However, concerns still remain on the underperformance of banking and auto stocks.

The comparison below is for all BSE sectors with respect to the Nifty (except on WTD basis).

Technically, the markets took strong support from 4,750 levels on Nifty and are now well above the 5,000 mark, making it a sharp 6%+ bounce.

The resistances for the markets are placed at 5,150-5,265 levels for the coming week. However looking at the kind of activity stocks are exhibiting, I believe that the markets can sustain this bounce as well.

Also, the sentiment is filled with pessimism, hence the chances of markets taking out the resistance is very high. However, the only strain could come from weakness in the global markets, or any new events unfolding in the coming week or month.

Markets have historically seen a volatile month of September. For starters, from 2003-2010, we had only one year of 2008 where Nifty gave negative returns. Barring that in the other 7 occasions, the market has closed in positive.

Even if history does not repeat itself, let’s hope it does rhyme!!

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Written by Kunal Bothra

September 5, 2011 at 1:53 pm