Stock markets back in bullish zone

The Samvat 2076 mood set in Indian stock markets. The investors started building portfolios across all the sectors and market caps. The benchmark indices closed positively in all five trading sessions last week.

Nifty gained 358.30 points, or 3.17 per cent, in the last week. Sensex gained by 3.1 per cent, Nifty Midcap and Smallcap rose by 4.2 per cent and 3.1 per cent respectively.

On the sectoral front, auto sector index gained maximum by 7.8 per cent. The interesting point is FIIs bought on all five days in the week.

Technically, Nifty closed at 11,670 after 61 days interval. The last time it closed this level was on July 17. The 'V' shape recovery for the eight days reached September 23 levels.

The Nifty retraced more than 70 per cent of June 3-August 23 fall and almost 100 per cent of September 23 to October 9 fall. Interestingly, it also has broken out of the downward channel formed from June 3 highs. The only concern about this breakout is lack of volumes.

From September 23 onwards, the volumes are consistently falling, and the distribution volumes are higher. After taking the support at 50 DMA and 61.8 per cent retracement of the earlier downswing, Nifty is comfortably moving higher with lower volumes and managing to protect previous bar low.

If it closes below the prior low, it will be the first sign of profit booking. After making a new swing high, it will attract some kind of profit booking. Let's watch whether the new swing high will end at 11,790 or higher.

A close below 11,540 may lead to some selling pressure. As many midcaps are bouncing back with a vengeance, the market may witness further bullishness with smaller corrections. These corrections or dips will give some better buying opportunities.

The Nifty Midcap cap index is yet to cross 100 EMA and the 200 DMA is still more than 200 points away. We can see similar conditions in Smallcap index. The RSI is made a new swing high in a weekly chart, but not on a daily chart.

Stochastic Oscillator reached to overbought condition. The MACD histogram has been increasing for the last three days. With these evidences, the current market structure is bullish, and any dip is a buying opportunity.

There are several stocks coming out of flat bases after forming different consolidation patterns. The market breadth is also positive for the majority of the days.

The number of stocks hitting new 52-week highs is also increasing every day. The most beaten-down stocks are witnessing sharp pullbacks. These are all initial signs of improving bullish strength.

(The author is a financial journalist and technical analyst. He can be reached at [email protected])