Investors Should Remain Cautious: Indian Stock Market Outlook by Epic Research

Investors Should Remain Cautious: Indian Stock Market Outlook by Epic Research

Indian stock markets have witnessed few days of trading near their all-time highs. While majority of mid-cap and small-cap stocks aren't trading strong enough, the market rally has been mostly supported by blue-chips. Indian economy is facing headwinds but with the help of government's quick fixes for economy, trading community is keeping a positive outlook. A review of Indian stock market by Epic Research follows....

Nifty indicates a Bearish reversal as the Bearish engulfing pattern emerges after a recent uptrend and that is a caution for bulls and opportunity for bears. The profit booking was very much evident across the board with indexes such as Energy, Midcap, Smallcap, Auto, and metals eroding a quarter to half of their last three months gain. The global cues were negative while Domestic events added further concerns over the economy.

The global cues were bearish with most markets showing sitgns of mild profit booking/correction due to negative sentiments that encircled amid Trade deal uncertainty. European indices continue to remain in sideways zone while the US Equity indices saw some profit booking as market participants prepare for Annual closing and long holidays in the later part of the month.

The domestic market which has been roaring backed by FII inflows and liquidity witnessed profit booking at higher levels as The RBI kept rates unchanged amid widely 'expected' cut and also lowered its growth projections of GDP to 5% which is much lower and at the same time now remaining calendar year may witness a growth that is much lower than RBI projection.

RBI is in a wait and watch mode as the recent series of rate cuts of 135 BPS needs to make an impact which can be assessed and then RBI can move forward. There is a lag and that lag has actually widened in last few quarters.

The markets reflected the same with a bearish engulfing on the weekly chart after a recent run up which is a bearish reversal pattern. There is also a trendline resistance that is confluencing at 12070. Nifty is seen much opportune for the bears and only 11850 now stand as the last chance for bulls amid all the negative sentiments building up.

An investor should rather be cautious at this point in time as the failure of nifty to sustain at previous ATH gives a major bearish indication. A close below in coming day or two below 11850 would completely reverse the trend in favor of the bears and lower targets can be seen towards 11200 - 11250. While 12100 continues to be a resistance.

We recommend a Sell only below 11850 on a closing basis for lower levels of 11600 - 11200. Sustaining above 11850 would put us back into the rangebound trading.