Stock markets hunt a seven day gaining streak; long term trend bullish but is correction on cards?

Nifty 50 was again hovering around the 11,850 mark on Friday’s opening bell after having surged past the 11,900 levels during yesterday’s trade. The benchmark index is sitting at these levels for the first time since February 24 after a six day rally that has taken it up from 11,222 levels. However, the recent rally does bring in the fear of a correction in the short-term. Analysts believe that the index is exhibiting bullish signals that could take it past the 12,000 mark but are also keeping an eye out for profit booking at the highs.

“With the market being overstretched, in the short term, a minor correction can’t be ruled out, but that would be an opportunity for investors to create long positions between 11,700 and 11,650 levels. One needs to keep a stop loss at 11,500 for the same,” said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities. On Thursday, Nifty corrected after crossing the 11,900 mark. 

Since last Thursday, Foreign Institutional Investors (FII) have bought domestic stocks worth Rs 5,040 crore and have purchased Index Futures worth Rs 3,098 crore. “Long buildup was seen in Nifty Futures’ where Open Interest went up by 7% with Nifty rising by 0.8%. Nifty Future turned into the discount of 3 points from a premium of 12 points in the previous session,” said Nandish Shah, Derivative Analyst, HDFC Securities in a note. “To Sum It Up, long build up in the Nifty Futures, long build up in Bank Nifty Futures, Put writing at 11,700-11,800 levels and long build up by the FIIs’ in the Index Futures segment indicates that one should continue to remain optimistic for the market,” he added while advising investors to remain bullish with the trailing stop loss of 11,700 levels.

Investors are also taking cues from Nifty ending above 11,800 mark on weekly expiry yesterday. The immediate resistance for the 50-stock Nifty is seen around 11,900-12,000 mark, said Ruchit Jain, Senior Analyst – Technical and Derivatives, Angel Broking. Shedding light on the Information Technology space, Jain said that their up move suggests a more stock specific action in the market. “Traders are advised to focus on such stock specific moves from a trading perspective,” he said.

Nifty experienced a muted opening hour on Friday, which analysts say is acceptable considering the rally we have had in the last couple of sessions. “The direction still remains on the bullish side and we can utilise these drops to accumulate long positions. The target for the Nifty should be 12,200-12,300 with a strong support at the 11,400 level,” said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.