Equity Markets Likely To Find Strong Support At Current Levels

A sharp fall towards the end of the truncated trading week brought the NIFTY back down to the 10,300 mark on Friday, amidst a mixed bag of macro data. IIP growth slowed down for the 2nd month in a row to 4.3% (down from 6.6% in July and 6.9% in June). CPI inflation too spiked, albeit slightly, from 3.69% in August to 3.77% in September.  However, core inflation (excluding food and fuel) witnessed a welcome dip from 5.69% to 5.62% month on month. 

On the technical front, an immediate further dip from current levels is quite unlikely, and the NIFTY is expected to find its feet at these levels and prepare for an upward move from these levels. The next immediate medium-term resistance is the 11,000 mark or the 20-week moving average mark, where the index should be headed over the next few weeks.

On the sectoral indices front, banks and pharma are looking particularly strong, whereas small caps and mid-caps are showing early signs of forming a base at these levels, after enduring significant strife for the 10 months of 2018. The CNX Small Cap Index has fallen nearly 40% from its January 2018 highs, and it won’t be surprising to see some degree of consolidation taking place here!

Broadly speaking, the medium term downside appears capped, and we’re likely to see indices inching up over the next few sessions.

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