MUMBAI: Tuesday’s move, which saw the Nifty and Sensex continue their rally, has led to some analysts forecasting a retest of the record high of the broader Nifty, from their earlier view of it being a short term bounce.
The reason for their change of view is that in continuing its rally on Tuesday the Nifty surpassed a key level of 17766, the 61.8% retracement of its fall from 18604.45 on October 19 to 16410 on December 20 last year.
The Nifty on Tuesday closed at 17805.25, up a per cent or almost 180 points after Monday’s 1.6% jump. “As opposed to this being thought of as a short term bounce, it’s now being thought of as the index preparing to retest its record high of October 19,” said Rohit Srivastava, founder, IndiaCharts.
Srivastava added that the move could be preceded by a 150-200 point correction on Nifty. Agreed Rajesh Palviya, technical head of Axis Securities. “The uptrend to the record high could resume after a shakeout, which could be around the corner,” Palviya said.
However, Siddarth Bhamre, director, alternative investments company InCred Equities, said for the Nifty to retest its record high, banks would have to perform. “Bank Nifty has underperformed the benchmark Nifty and other key indices so far,” added Bhamre who is bullish on select IT services and pharma companies. The 61.8% retracement is part of the Fibonacci levels of 23.6%, 38.2% and 61.8%. They are levels to which a stock or index can retrace after which it resumes its original directional move.