Week Ahead...

The Indian equity markets were rattled by the Middle East headwinds and the fear of outflow of FII money to cheaper Asian peers like China, dragging the benchmark indices down nearly 4.5 percent for the week ended October 4 with spike in volatility. The market was also worried due to the jump in oil prices after rise in Middle East tensions.

The BSE Sensex plunged 3,883 points to 81,688, and the Nifty 50 declined 1,164 points to 25,015, underperforming the broader markets as the Nifty Midcap 100 and Smallcap 100 indices were down 3 percent and 2.5 percent respectively.

The market is likely to witness a consolidation phase as the expensive valuation and unfavourable macro situation may influence investors to adopt a sell-on-rally strategy.

After the higher-than-expected cut in interest rates (50 basis points) as well as hint about more rate cuts going ahead by the US Federal Reserve, all eyes will be on the conclusion of three-day Monetary Policy Committee meeting of the Indian central bank on October 9.

Technically, the market structure is looking weak with the Nifty 50 index forming long bearish candlestick pattern, recording lower high-lower low formation, falling below 5-and-10-week EMA (Exponential Moving Average) with negative bias in the momentum indicator RSI (Relative Strength Index) on the weekly timeframe. Considering heavy selling last week, the bounce back in initial part of the next week can't be ruled out but the sustainability of that bounce is the key to watch. As long as the index holds 25,000 on closing basis, the rebound towards 25,300-25,500 is likely next week, but the decisive fall below it may drive the index down to 24,750 (the September low) followed by 24,500 (20-week EMA) being crucial support.

The weekly options data indicates that the Nifty may face hurdle at 25,400-25,500 on the higher side, however on the lower side, the immediate support lies at 25,000, followed by 24,800 and 24,500.