Markets in consolidation phase now

Indian equity markets are able to close in positive territory for the third consecutive week, thanks to strengthening rupee and fall in crude oil prices. The BSE Sensex gained 299 points and Nifty moved up by 97 points last week.  Though the market is moving upside and FIIs are net buyers, the market breadth is negative, which is a concern. 

On the data points, IIP for September 2018 increased by 4.5 per cent YoY mainly led by growth in manufacturing and electricity output. CPI inflation for October came in at 3.3 per cent against 3.70 per cent in September, driven lower by soft food prices.

Next week, the biggest trigger for the market is the outcome of the RBI's board meeting. There are indications that tussle between RBI and Finance Ministry may take a new twist with proposal to give more powers to the RBI Board. If this happens, there may be a series of developments.

Watch these developments closely. And on the global front, trade war tensions cooled off. And emerging markets and their currencies are stabilising.

Technically, the Nifty retraced almost 38.2 per cent on slower pace after a series of indecisive candles. The index is still below the 200 DMA and yet to make a higher high, which is a trend reversal signal. As there is no negative divergence on major indicators, most of them are still in tradable buy zones.

As long as Nifty sustains above 10435, there are chances to test the 200DMA level of 10755. The interesting technical event visible on a daily chart is that the 50 DMA cross under 200DMA, called death cross, is a long-term bearish sign. So, any adverse negative news will dampen the market sentiment and pull down to the support levels. 

The Nifty may consolidate for some weeks within the range before breaking decisively either side. (The Hans Research Team)