Nifty outlook: HDFC Securities reveals range market expected to move in next week

Indian equity benchmark indices ended lower in a highly volatile session today. However the intraday range for the Nifty was just 121 points. At close the Nifty was down 18 points or 0.14% at 12,969.  Nifty gained for the fourth consecutive week (up 0.85% WoW) and recorded the largest monthly gain in November since April.
 
Among sectors, Auto and PSU Banks were the main gainers while IT, Infra and Energy indices were the laggards. Broad market indices like midcap and smallcap indices ended sharply in the positive.
 
Asian and European stocks were mixed on Friday, amid thin trading volumes, as investors went into sidelines on reports raising doubts about the effectiveness of AstraZeneca’s COVID-19 vaccine.
 
Nifty continues to consolidate after making a high on Nov 25. It has formed a doji on weekly charts after a sustained rise, suggesting caution at high levels. Also a three day weekend pushed traders to reduce their open positions. An upward breach of 13146 is necessary to expect more upsides while a downward breach of 12833 could bring in more downsides and mean that a temporary top has been made on Nov 25.  A better than expected India Q2 GDP number this evening could result in a good opening on Tuesday.
 
After showing a promising upside bounce from the lows on Thursday, Nifty shifted into a choppy trend on Friday and closed the day lower by 18 points. Nifty opened Friday on a minor positive note and showed a range bound movement for the whole session. Minor intraday dips have sustained with upside recovery towards the end and Nifty closed the day on a slightly negative note.
 
A small negative candle was formed with a minor lower shadow. This pattern could indicate a sideways range movement at the highs. The formation of the bearish engulfing pattern of 25th Nov is still intact. Unless Nifty moves above the high of that pattern at 13145, consolidation movement or a minor weakness from the highs could be expected in the short term.

The Q2 GDP numbers came in at a big positive surprise. Though Agriculture and Services numbers came in a little below expectations, manufacturing growth has come in much stronger than expected. This will entail revising downward the full year GDP contraction forecasts. The key thing to watch out for is the time services will take to come back to normal and whether manufacturing growth reflects restocking/pentup demand or is reflective of normal demand conditions which have revived sustainably. Equity markets could open higher on Tuesday reflecting the positivity of the Q2 GDP numbers.
 
Nifty on the weekly chart has formed an interesting pattern like doji at the new all time high of 13145. Normally, a formation of doji after a reasonable upmove could indicate alert of trend reversal post confirmation of weakness in the subsequent weeks.
 
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The doji pattern was formed just above the crucial long term resistance of the ascending trend line (uptrend line connected from top to top-weekly/monthly chart), which signal chances of downward correction below the trend line support of 12800 levels.
 
Conclusion: The short term trend of Nifty is choppy and the market is expected to move in a range of 13100-12800 levels by next week. The study of long term charts like weekly and monthly time frame signal crucial overhead resistance for the market around 13100-13150 levels. The lower area of 12850-12750 is going to be an important base for the Nifty and a decisive move below this area could open a sharp downward correction in the market.