Technical analysis: Markets wear a festive look

VK Sharma

Markets continued to do well even after Diwali, with the Nifty 50, Midcap and Smallcap indices rising 1.06%, 2.02% and 2.69% respectively. Retail investors are happy that the mid- and small-cap indices have done better than the large caps. And what’s more, the markets have delivered a weekly gain for the third time on the trot.

Look lower to trendline 16, which is formed by joining the low of 19,223 formed on August 31 and low of 19,333 formed on October 4. Markets leap of Wednesday last has put the Nifty above this trendline also. So, in one giant leap, both the trendlines were crossed, which is bullish.

The third observation is that the Nifty is now above its 50-day exponential average (19,478) which also augurs well.

This average now becomes the support. This is also near 19,500, where heavy Call writing was observed earlier. Now we see Put writing at 19,500 and 19,600, which lends credence to the support. Resistance is seen at 19,875, the intraday high of last week. Once this is crossed, the Nifty will then gun for the all-time high mark of 20,222 seen two months ago.

November is usually a good month for our markets. The month has already seen a gain of 3.42% till date in the Nifty, which is more than its average return since 1991. In the US, too, the Dow has averaged more than 1% for the last 100 years.

Markets love to climb a wall of worries. Whether it is a war or fear of election outcomes, they eventually climb them. Our markets, which fell 4.15% in the aftermath of the strike on Israel, have now fully recouped their losses and are 0.4% higher.

I do not think there is any need to worry about the outcome of the elections. But even if you are worried, it’s time to remain invested if the past is anything to go by. According to HDFC Securities research, if you had invested six months before the election outcome data, the returns have been positive in all the past five Lok Sabha election instances and have ranged between 9% to 36%. Remain invested!

(The writer is a market veteran with 34 years of experience. He retired from HDFC Securities as head of PCG and capital market strategy.)