Nifty to see resistance around 16,850 and support at 16,100 levels, says market expert Jai Bala

BSE Sensex and NSE Nifty rallied to end at record highs on Friday. For the week they ended close to 2 percent higher. For the week, Nifty gained nearly 1.8 percent but the midcaps underperformed and the index was down nearly 1.24 percent, the small cap index also underperformed, and it was down nearly 1.68 percent.

However, in terms of indices, there was a lot which went on with the IT space. The entire Nifty IT Index gained nearly 4.4 percent. The other sector, which stood out was the pharmaceuticals. The index itself was down nearly 3.2 percent and the PSU bank index also underperformed a little bit.

To review the week gone by and prepare for the next trading week, CNBC-TV18’s Prashant Nair and Ekta Batrato spoke with Aditya Narain, Head-Research, Institutional Equities, Edelweiss Securities and for a technical view Jai Bala, CMT of cashthechaos.com.

When asked where he saw the next Nifty levels, Jai Bala said, “Last time when we spoke, I said, we need to be looking at the markets and as long as a markets maintain 15,450 it was a buy on the dip market and market behaved perfectly alright and the next resistance would come at 16,850. But under the hood, the markets is seeing some deterioration of the market breadth. That is a warning sign, but the deterioration hasn't risen to alarming levels. But it's a point of caution, be watchful of what you pick and what you choose in the markets.”

He further said, “The banks, which were actually struggling and underperforming, are trying to attempt a semblance of a rally, particularly from the private banking space and that can actually be a positive for the market. But the key resistance for the markets on the Nifty is about 16,850 and the support is about 16,100. On the banking index, the resistance comes at about 36,500. And the support comes in about 33,800. So one must watch these ranges and as long as markets are able to negotiate these ranges bullishly, the trend that is persisting the market is likely to continue” said Bala.

Narain said, “I have absolutely no idea what the levels are going to be straight away or next week or week after that but I do believe that over a period of time, it will probably come off marginally. So the formal number that we have out there, which in our view is 16,100 for June next year. So whether it comes up quickly, or it takes it stretches on the upside and then comes back. Our sense is are going to get some sense of moderation from where we are at this point in time.

According to him, one saw a lot of expansion as far as the broader part of the market was concerned. “At this point in time, I don't think you're getting a commensurate speed as far as the breadth of the economic recovery is concerned, in my view, that would tend to suggest that at the end of the day, if the market were to settle a little lower over the course of that over the next six, nine months, the broader market might just come off a little bit.”

“To me, it is just kind of trying to say the market should mirror the economy. And I do believe while you know, there are there are green shoots, and there are some good numbers that are coming out, the economic revival is not as broad based, or let's put it this way, the economic trajectories remains relatively narrow for the market to respond in such a broad manner, said Narain.

He said timing the market on a weekly basis is not possible but by and large one should tend to ride it out. “As long as you are generally positioned in areas where you think that is much more structured tailwind than necessarily cyclical, because I think that's what provides you a greater hedge and that is what provides you sustainably greater business protection. And that's how I would tend to play,” he said, adding that by and large. If you think your position on the safer side in terms of the underlying business, then you should basically stay put.

“If you want to be very cute with your timing or you have something very specific to buy either in terms of a stock or a different asset class, then you could switch a little bit at this point in time,” said Narain.

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