Week Ahead

The BSE Sensex plunged 1,836.95 points or 3.11 percent to close the week at 57,200.23, and the Nifty50 declined 515.20 points or 2.92 percent to 17,101.95, taking two-week losses to more than six percent. The broader markets were also caught in a bear trap with the BSE Midcap and Smallcap indices falling in line with benchmarks.

IT stocks were hit the most, with Nifty IT index falling more than six percent, followed by metal, FMCG, pharma, realty, infrastructure and financial services. However, Nifty Bank outpaced others by gaining third of a percent amid a good set of earnings performances.

The coming week is going to be critical as the Union Budget will be presented on February 1, which will have an impact on market sentiment and economy. Apart from that, the focus will remain on earnings and economic data, so there could be volatility as well as stock- specific action.

All focus next week will be on the much-awaited Union Budget that will be presented by finance minister Nirmala Sitharaman on February 1. The government is expected to continue its focus on growth with an investment- oriented approach as the economy is in recovery mode, but with a plan for fiscal prudence.

Technically Nifty50 formed a bearish candle which resembles a shooting star pattern formation on the daily charts, and also back-to-back bearish candle pattern formations on the weekly scale, indicating nervousness among traders ahead of the Union Budget.

We feel if the index defends the 16,850-16,900 support zone in coming days there could be a bright chance of a sharp recovery up to 17,300-17,500 which could be near term hurdles.

The crucial support of uptrend line could be tested again around 16,850-16,900 levels by next week before showing another small upside bounce.