Stock markets ready to celebrate Diwali. Will Nifty hit 18,000 this week?

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Indian stock markets had a decent recovery last week after three weeks of consolidation. Markets remained resilient despite multiple headwinds as the dollar surged above the 83 mark while US bond yields hit a record high. We are heading into a truncated festival week where bulls have reason to celebrate Diwali on a higher note as the US market saw a sharp rebound in Friday’s trading session.

The market will continue to watch the direction of global markets, the dollar index, US bond yields and crude oil prices. On the home front, the October expiry may bring some volatility, while Q2 earnings will drive stock-specific moves.

Technically, Nifty is witnessing the formation of higher highs and higher lows after meeting its 200-DMA. On the upside, 17725 is an immediate hurdle; above, we can expect a rally towards the 17900-18000 area. On the downside, 17400 is an immediate and strong support level while 17300-17200 is the next demand zone. In line with the open interest distribution, 17500 will act as a major selling base ahead of the monthly expiration.

Bank Nifty is outperforming and should head towards an all-time high of 41,840. On the downside, 40,500 is immediate support while 40,000 is a strong support level.

The FII’s long exposure to the index futures contract is 30%, which is still in oversold territory, while the put call ratio is at a neutral level of 1.03. The market is light and it will also have the support of short-coverings.

Santosh Meena is Head of Research at Swastika Investmart Ltd.

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