Market outlook next week: Bulls looking for some rest ahead of the F&O expiry

Indian shares ended lower on Friday, with the benchmark Nifty 50 index snapping an eight-session winning streak, as investors locked in profits after the sharp rally. The NSE Nifty 50 index closed down 1.1% at 17,758.45, recording its biggest percentage fall in nearly two months. The S&P BSE Sensex dropped 1.08% to 59,646.15 in its first fall in six sessions. The decline marked the index's biggest percentage loss since June 22. Still, both indexes notched up their fifth week of gains, with the Nifty 50 adding 0.34% and the Sensex 0.3% for the week.

Santosh Meena is head of research at Swastika Investmart Ltd.

It was a fifth straight week of gain for the Indian equity market thanks to buying by FIIs and short covering. However, sharp profit booking was seen in Friday's trading session as global cues were jittery. This week we have the august month F&O expiry where bulls are looking for rest after a gain of more than 6% in the august series. There are not a lot of triggers but global cues, August month F&O expiry, and FIIs' behavior will be important factors in the direction of the market.

Technically, the Nifty is pausing near the psychological hurdle of 18000 whereas 18000-18100 is the resistance area and there is a risk of some profit booking as most of the momentum indicators are showing overbought reading however 17700 is an immediate and important support which bulls will try to protect.

Below 17700, profit booking may see an extension towards the next demand zone of 17450-17200.

Bank Nifty is witnessing profit booking from the level of 39,750 however 38,800 is an immediate support level where we can expect a bounce-back while if it slips below 38800 level then 38,300-38,000 will be the next demand zone.

As per the option chain, 17,900-18,000 strike call options are holding the highest open interest which is acting as an immediate resistance area while 17500 will act as immediate support. FIIs' long exposure in index future stands at 48% which is neutral however PCR dipped to an oversold level of 0.88.

Ajit Mishra, VP - Research, Religare Broking Ltd

Markets ended marginally in the green last week as profit-taking on Friday trimmed all the gains. The tone was upbeat for most of the week, tracking favourable global markets and continuous buying from foreign investors. However, the decline on the final day engulfed the gains of the last 3 sessions as participants preferred to book some profits off the table. Consequently, the benchmark indices, Nifty and Sensex, lost the majority of the weekly gains and settled at 17,758 and 59,646 respectively. Most sectoral indices traded in tandem and ended flat to slightly higher. However, realty and FMCG managed to post decent gains. Amid all, the broader indices, midcap and smallcap, too witnessed profit booking.

In the coming week, the scheduled derivatives expiry will keep the participants busy. Besides, global cues especially from the US and figures of foreign flows will remain on the radar.

Markets may witness consolidation after five weeks of the successive rise and it would be healthy. We hardly saw any major decline in the index in the recent phases of consolidation however a lot would depend on the performance of US indices next week where we see still see room for further upside. We believe the 17,300-17,600 zone would provide a cushion in Nifty next week while a rebound towards the 17,850-18,100 zone may attract profit-booking. It’s prudent to focus more on risk management as correction/consolidation in the index usually derails the momentum even in the top-performing sectors. For fresh positions, we suggest preferring less volatile stocks until the trend resumes.