The Indian equity market may remain in a consolidation phase for some time in the New Year if no major global event takes place. The benchmark Nifty 50 may see movement only if it breaks holding points at the higher and lower end, according to three technical analysts.
Milan Vaishnav, Mohit Handa and Prasenjit Biswas, members of the Chartered Market Technician Association, advise investors to look for key markers in equity, currency, and commodity markets in 2022.
“We need to keep an eye on the 18,600 level for Nifty 50 because if that level is not taken out, I don’t see a runaway rally happening in Nifty,” Vaishnav said. "Unless the immediate low point of 17,700-17,800 is defended, I see the market remaining consolidated in the near term.”
The Nifty 50 fell below those levels in a volatile last week. The index was trading at 17,010 as of 11:45 a.m. on Monday.
Biswas said the “risk for making a profit will be higher in the coming months due to the high level of gains we have made in the last 19 months”. “The level of a downside, which usually comes post such gains, needs to be kept an eye on.”
If the Nifty 50 breaks the 16,600-mark, the medium-term holding level may be tested, he said.
Vaishnav does not see the broader market doing well if the core sectors like banking and auto consumption continue their minor gains from 2021 into 2022.
Globally, Vaishnav said, the “asset allocation models need to be kept an eye on”. "Equity market versus the other assets classes is something that needs to be looked at closely along with the relative performance of the dollar index.”
Handa agrees. Since equities, commodities and dollar index gained in the latter half of 2021, he said, the movement is not sustainable and one of them may witness a decline.
He sees demand for the dollar rising due to high commodity prices even as he expects "some correction" in commodities. “Breakout from the sustained levels for (U.S. Treasury) yields and commodity prices will determine how inflation risk will play out across the market,” Handa said.
Handa will watch for the performance of the domestic market versus global peers. He sees constraints for the rupee to appreciate in 2022 even though the Indian currency has had a "decent 2021".
Watch the full conversation here:
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