Markets likely to remain volatile this week

The global equity markets traded with high volatility last week. Despite the weak global market, Indian market has shown resilience and is seen maintaining a positive trend. The Sensex closed down by 220 points, Nifty closed down by 51 points on weekly basis. Nifty Midcap, small cap outperformed the benchmarks indices y 0.7 per cent and 1.6 per cent respectively.

Volatility is likely to remain high in the coming truncated week on account of the December series F&O expiry. Structurally, the Nifty midcap and smallcap indices continued to form a higher peak and trough, displaying relative outperformance.

As the index logged a breakout from past two month's consolidation, we expect the broader market to outperform benchmarks in coming sessions. Hence, we recommend a focus on quality stocks with improved earnings.    Overall in the coming weeks, we expect the index to consolidate in the broad range of 10,600-11,000 levels thus forming a base for the next up move.

The resilient Indian equity market suddenly turned bearish at weekend. As we cautioned earlier, though the market is not falling, and moving against the global markets, finally it has given up by falling about two per cent.

Technically, The Nifty formed a shooting star on the weekly chart at a higher level which is a clear bearish sign. It also closed below 200 DMA. The 19th December's high of 10985 could be intermediate top and right shoulder has a very big Head and Shoulder pattern.

The neckline of this pattern placed at 10,000-10,100 level. The market may reach this level sooner or later if it does breach the recent high of 10,985. With Friday's move, the negative divergences are clearly visible in many of indicators, and some of them are giving clear bearish signals.

The leading indicator RSI is unable to sustain above bullish zone, turning down. The MACD is also showing some kind of negative signals. Stochastics already turned down. If the Nifty breaks down the neckline, it can turn into a long-term bear market. So, it is time to avoid longs at this juncture and try to book portfolio profits. Better stay in cash or cash equivalents. (The Hans Research Team)