These Resistance Levels Are Key For Market Rally To Continue, Say Analysts

Markets will witness a strong rally once the key resistance levels are breached, according to analysts.

In the last 15-20 days, the markets saw resistance around the 22,125 level twice, after which they witnessed some time-based correction, according to Ruchit Jain, lead research analyst at 5Paisa Ltd. "Once we give a breakout above 22,127 high, that would be the confirmation that time-based corrective is behind us and we have resumed the broader uptrend."

As of now, the trend remains positive, and the kind of participation that is seen in broader markets should lead to further up-move, according to Jain.

The Nifty has consistently closed above the 21EMA for the last few days, indicating a positive trend, said Rupak De, senior technical analyst at LKP Securities Ltd. "The momentum indicator RSI has experienced a bullish crossover, following a base formation. A move above 22,200 could potentially take the Nifty towards 22,600. Support on the lower end is placed at 22,750."

The benchmark equity indices gained more than 1% this week, with shares of Mahindra & Mahindra Ltd. and Wipro Ltd. adding around 11%.

The NSE Nifty 50 closed 121.85 points up, or 0.56%, at 22,032.60 and the S&P BSE Sensex gained 365.84 points, or 0.51%, to end at 72,416.22.

Both large and mid-cap stocks are poised for gains, according to Chakri Lokapriya, managing partner at RedStrawBerry LLP. The theory that large caps have underperformed midcaps does not really hold, he said. "Some mid-cap companies will benefit significantly from government capex spending."

Auto stocks, along with the auto ancillary companies, are rallying in anticipation of future growth, Lokapriya said. The whole automobile space is going through a new growth phase, he said, while adding that TVS Motor Co., Tata Motors Ltd., and Maruti Suzuki India Ltd. are the stocks he is positive on.

For the Bank Nifty, the 46,700 level remains a crucial point, Jain said. If the Bank Nifty closes above that level, it would be confirmation of participation in the banking space, he said.

Banking stocks look interestingly poised for a good uptick, according to Jain. "Although the PSU banks have shown outperformance, we have not yet seen it from the private sector."

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