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The Nifty is not looking good, it is suggesting a possibility of further downside movement unless there is a major surge upwards clearing the 5305 levels decisively.

The Asian markets are emitting mixed signals with Japan, New Zealand and China clocking over 0.50% gains while Hong Kong, South Korea and Taiwan trading in the red as we write this Market Outlook. The SGX January Nifty is trading at 5270 up by 11 points from its previous close but on very low volumes.

Today, the range between 5285 and 5305 would act as a major supply zone while support is likely to be found initially between 5253 and 5241. Below that range, support might also come in between 5224 and 5208. Only when 5200 level is broken by the Nifty we may see more weakness coming in the bulls sacrificing part of their initiative marking the beginning of a corrective swing.

While the probability of such a swing down is more but in the event of an unlikely upswing we need to monitor 5305 very closely as the index needs to clear it successfully to make further strides. Above that level, 5314, 5335, 5354 and 5386 are key resistance levels. Even if a breakout happens now above 5305, we do not expect it clear all these levels prior to 5400 in the short-term.

One thing, however, needs to be mentioned here: select mid-caps and small-caps would continue to rally but even some of them that have been moving up quite a bit would also get into profit booking mode if they have not done that already.

Rajat K Bose