Nifty: Nifty stuck at 16,000? 3 factors restricting market from rallying higher

NEW DELHI: In a constant tug-of-war between those buying the dips and others who are selling the rallies, Nifty appears to be stuck around the 16,000 mark for now. After bottoming out at its 52-week low level of 15,183.40 on June 17, Nifty has been trying to gradually inch higher. In the last fortnight, the index has been hovering close to the 16,000 mark.

“The 16,000 mark is crucial not just from a sentimental or psychological point of view. It is also a very crucial support level as it is the 50-day DMA (daily moving average) of Nifty. The long-term and the medium-term outlook of the market would be positive till the time it is above 16,000. A breach below that level would give bearish signals,” Kranthi Bathini of WealthMills Securities told ETMarkets.

While bearish foreign investors are not allowing the market to go up, bullish domestic investors are not allowing Nifty to fall drastically.

Analysts cite three factors – gloomy IT results, depreciating rupee and fear of global recession – that are restricting any sizable up move in Nifty.

IT stocks
In a clear signal that the market did not like the June quarter numbers of

and amid margin compression and weaker-than-expected profit figures, Nifty IT index lost over 6 per cent this week. HCL Tech lost 10.2 per cent and TCS 8.2 per cent of its value.

Rupee factor
The Indian rupee fell for five consecutive days and touched a new record low of 79.96 against the US dollar on Friday as investors chose to stay away from riskier assets.

Jateen Trivedi, VP – Research Analyst at , said the rupee can fall further towards 80.50. “Rupee range can be seen between 79.50-80.50 for the coming week,” he said.

Recession fear
“As concerns of growing inflation and recession hang over the global economy, Indian benchmark indices are projected to remain uncertain in the near term. In this context, investors are anticipated to keep a close watch on the currency market, as the USD/INR has reached a new all-time low,” said Apurva Sheth, Head of Market Perspectives, Samco Securities.

Market strategy
Analysts said volatility has re-emerged and investors have turned their focus on the upcoming Fed policy in the backdrop of heightened US inflation.

“This is one of those tricky environments where there is no clear direction. The absence of any positive triggers is keeping traders on tenterhooks and long-term investors don’t want to jump in either because valuations haven’t turned extremely attractive just yet. The best strategy right now is to either have some cash on the sidelines or keep buying fundamentally strong stocks in a phased manner, something like SIP,” said Rahul Shah, Co-Head of Research at Equitymaster.

Analysts also note that the sectoral leadership in the market is changing almost every week. “This is not a bear market. There is a lull in the market as there is no positive news,” Bathini said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)