Nifty, India’s bellwether index, over extended in the past week and showed signs of exhaustion after continued buying pressure. The index pierced its flat range of 11,800-11,900 range despite choppy markets.
Analysts expect that the current move is not sustainable with limited scope for more upside from present levels. The index is expected to soon enter into the consolidation mode with bouts of volatility ahead of the GDP numbers expected next week.
The index has been on an uptrend in the past couple of weeks on the back of buying support from foreign institutional investors. Apart from that, robust quarterly numbers coming from corporate India, strong buying support from domestic institutional investors and attractive valuations have all lent support to the index.
However, with the index being over extended on the technical charts, analysts suggest that investors should avoid chasing the up moves on the back of this rally. As there exists a limited scope of further gains, investors are expected to remain watchful in the coming week.
The key levels to watch out for on the upside should the index maintain the rally are 11,968 and then 12,050. Technically, any close above 12,000 mark could be a bullish sign, however, any close below 11,870 could be a bearish indication.
Given the over extension and key technical levels, analysts suggest that investors should not get greedy and be prepared for consolidation at the higher levels.
Overall, investors should remain stock specific and focus on fundamentals. However, it would be wise to avoid chasing up moves as the coming week is likely to be volatile.