Nifty looks extremely overbought - Alex Mathews

The markets opened in a positive way tracking some positiveness in the global front and moved with some amount of volatility but later in the first part of the afternoon session we saw markets moving down into the red zone. In the last part session we saw smart recovery in the markets which took them into the green and closed for the day in green near to the day's high.

The rating agency S&P had raised India's outlook from 'negative' to 'stable' which reassured the investors that the companies and the markets are doing well. But as the markets are in the overbought region for some days now with the five day RSI at around 90 and 14 day RSI at around 70, the upside was some what capped and the markets moved without much upside or downside.

We saw buying interest in the Consumer Durable, Healthcare, Oil etc while profit booking started in realty and IT sector stocks. The advance tax numbers helped our markets in the recent rally but the rising inflation number is putting pressure on the Central Bank to take decision regarding interest rate hike probably ahead of the policy meet scheduled in April.

On the stock specific front, we had gainers like Dlink India, MSK Projects, Kalyani Forgings, S Kumars etc while the losers included Texmo pipes, Emkay, Donear, Khaitan Ltd etc.

The late recovery in our markets were supported by European stocks which were up as Lloyds Banking Group surged after it said that it would return to profit in 2010 and the US index future remained in green with minor gains and finally our markets came to a close with Sensex up 0.34% and Nifty up 0.32%.

As the RSI indicates, Nifty is extremely overbought and so a correction is due which can be expected in the second part of the Monday trading session or Tuesday morning. Nifty is having resistance at 5300 and 5320 while the support is seen at 5198 and 5155 levels.

Source : Equity Bulls

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