Nifty to face resistance above 5,900

The volume-driven bull rally continued right from the opening bell with Nifty September futures making a swift move to the intra-day high of 5,875 before closing comfortably at 5,861.50.

The market is looking good. Strong short-covering provided comfort to investors to delay profit-booking. The current bull run is a global phenomenon driven by the western economies through emerging markets, says Moses Harding, head (global markets group), IndusInd Bank. India, being considered a safe haven, outperformed others in September.

Nifty September futures moved in a narrow band due to profit-booking in the morning. Strong short-covering above the initial balance range (first two TPOs, or time-price opportunities) saw Nifty rising to a high of 5,875. There was profit-booking above 5,865, which pulled down the index from the day’s high to 5,861.

The futures added 1.35 million shares while the intraday trading pattern indicated that the fresh build-up contained a blend of short and long positions. The TPO and volume picture hints at a rally beyond 5,900 in the near future.

There is now greater confidence that the indices will re-visit the historic highs seen in early January 2008, with first hurdle at 19,700 for the Sensex and 5,900 for the Nifty. There is also greater risk from the regulator, who may wish to limit the momentum by cutting leveraged investment flows through borrowed funds, says Harding. RBI has done this before through higher credit risk weight and additional provisions for lending in the stock market. This may be announced in tomorrow’s mid-term monetary policy review. So, it is important to observe caution and remain fleet-footed to switch direction.

According to a technical analyst at PINC Research, short-term technical parameters are getting stretched. The upmove has been there for the last seven sessions now and that makes it ripe for a short halt. Analyst expects a small consolidation over the short term. However, the medium term trend remains firmly robust and the possibility of further extension of the trend is very strong. The potential for the index to reach 6,200-6300 over the medium term remains open. The short-term may, however, generate a small correction, which we believe can be an excellent opportunity to buy stocks.