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Consolidation seen before Nifty hits 9400; 8 factors to watch out

Equity Tips
The market hit record highs in the passing week (Sensex at 30,184.22 and Nifty at 9,367.15 intraday) on better-than-expected earnings (by cement, auto and midcap banks) and likely PSU banks' recapitalisation. Global factors like easing of political risk in Eurozone post favourable French elections results, and expectations of US tax reforms also boosted market sentiment. The Nifty gained 2 percent (at 9,304.05) during the week despite consolidation in later part of the week due to extended weekend and mixed global cues.

On the monthly basis, the market continued northward journey for fourth consecutive months. In fact, the year so far has been good, with Nifty posting 13.66 percent gains year-to-date (up 1.42 percent in April, 3.31 percent in March, 3.72 percent in February and 4.6 percent in January).

Such a stellar performance is unlikely to continue in the coming truncated week as well as in May. With expensive valuations at current level, the market has to consolidate more before moving towards another psychological 9,400 mark on the Nifty and volatility index also indicated the same trend, experts say.

The market will remain shut on May 1 (Monday) — Maharashtra Day.

They expect minor correction and every dip is likely to be bought. Major correction, according to them, is unlikely due to favourable domestic factors like consistent buying by domestic institutional investors despite FIIs' selling, better-than-expected earnings so far (indicating faster recovery in FY18) and stability in economic reforms after recent state & municipal elections. Lower crude oil prices also played supportive role for the market.

Following the recent run up, Indian VIX i.e. volatility Index, has reached the lower end of the range currently placed at 10.87. As VIX has a tendency to revert back to mean, a reading so low warrants a rise in the volatility in the coming sessions, which could lead to minor corrections, says Prasanth Prabhakaran, Senior President & CEO at YES Securities.

While movement at the Index level could remain muted, stock specific movement on account of the ongoing earnings season could be seen, he adds.

Rakesh Tarway, Head of Research at Reliance Securities says he expects markets to consolidate at current levels in the broad range of 9,100-9,500 levels for few weeks as some amount of consolidation would take place after a sharp up move.

The option data continued to suggest a strong support at 9000 with an open interest of 44 lakh shares in put options. On the upside, 9500 has the highest open interest of 42 lakh shares in call options.

Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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