Tech view: 3 reasons why Sensex & Nifty are failing to hit new record peaks

The traders and investors are cautious of heavy profit booking in the indices. However, there aren't any major technical signals to support this view

The benchmark indices -- BSE Sensex and NSE Nifty -- are struggling to cross their recent record levels and are in a consolidation phase, which according to analysts, is a sign that the bulls are in a 'fatigue stage'.

The BSE barometer Sensex is currently trading 800 points down from its all-time high of 53,126 while Nifty50 is off some 200 points from the record peak of 15,915. While the overall trend for the benchmark indices look positive, the current scenario is reflecting a confused state of mind among market players. 

In the first half of the current year 2021, Sensex and Nifty have gained 10 per cent and 12 per cent, respectively. Traders and investors are fearful of heavy profit booking in the indices, however, there aren't any major technical signals to support this view.

Fundamentally, analysts are of the view that for the index to get out of this sideways phase, leadership change is needed. "If the market is to turn bullish again, current underperforming sector like banking has to emerge as a leader in the next leg of the rally. In the present rally, metals and IT have been the clear leaders and these two segments are likely to remain resilient but they are unlikely to move up significantly due to high valuations. So, market leadership change is imminent, and private sector banking and industrials are the likely candidates," said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.

On technical charts, Sensex has immediate support at 52,100 and major support at 51,200. Likewise, Nifty50 is showing firm bullishness at 15,600 and 15,150 levels. As long as these levels are not breached with aggressive selling pressure, the medium-term trend for both indices is expected to stay positive.

Here are the three reasons why Sensex and Nifty are struggling at record levels:

Relative Strength Index (RSI)

During the start of the June F&O series, the RSI was above 70 levels, indicating weakness in the overbought category, for both the indices. Now, even when the current RSI is around 60, i.e. below the overbought territory, the indices are unable to regain price strength. Going ahead, optimism can return to markets only if the price action shows strength or RSI crosses the resistance mark of 65 on both indices. CLICK HERE FOR THE S&P BSE SENSEX CHART

Bollinger band

Over the last few sessions, the indices have been unable to cross or trade near the upper Bollinger Band, suggesting pressure below the overbought region. But now, as the Bollinger Bands are in a contraction pattern, a price expansion on either side can result in a sharp move in index prices. The upward band for S&P BSE Sensex and Nifty50 are located at 52,903 and 15,870 levels while the lower bands are placed at 52,215 and 15,627, respectively. CLICK HERE FOR THE NIFTY 50 CHART

Weak follow-up buying momentum

Both the indices are showing weak momentum on the volume side. Heavyweights like HDFC Ltd, HDFC Bank, ICICI Bank and Reliance Industries need to show added interest with aggressive momentum as follow-up volume is very significant for building price strength in the longer term. Except for Infosys, Tata Consultancy Services and Hindustan Unilever, others have failed to build positive strength on volumes.