The Nifty is expected to cross the 200 DMA (daily moving average) level of 3,445 next week. However, the index has to sustain above this level for its fresh journey towards 3,661, which is 261.8 per cent Fibonacci level of the recent swing in the Nifty, from a high of 2,970 to a low of 2,543. The strong support for the Nifty is seen at 3,000.
The Nifty witnessed profit booking at 3,400 on Friday and ended the session forming a Doji pattern, indicating uncertainty. The five-day Relative Strength Index (RSI) is in the overbought zone, while 14-day RSI continues to depict caution.
Nevertheless, foreign institutional investors (FIIs), net buyers in the cash and derivative segments this week, are expected to drive up the market. FIIs have bought shares worth Rs 1,800 crore in the cash segment in five trading days of the current month as per the provisional data compiled by BSE and NSE. In the futures and options segment, FIIs have build up fresh long positions of 94,550 contracts in the Nifty futures in two trading days.
According to Gautam Chand, CEO, Instanex Capital, FIIs and local speculators are likely to take equity markets to fresh highs in the next few weeks. India is a liquidity-driven market, usually driven by FIIs or by what local speculators feel FIIs will do.
The Instanex FII Index, which comprises top 15 companies in FIIs portfolio, has moved with the Sensex since March 9, up 29 per cent. The Instanex Retail 15 Portfolio outperformed the market with 33 per cent gains, indicating local speculators were driving the market high.
However, since local speculators plan to offload their purchases to FIIs, any dip in FII inflows would result in sharp drops in local markets. He expects the rupee to strengthen against the dollar and the yen as easy credit and low interest rates in these economies support re-leveraging by hedge funds.
