Nifty tests a crucial barrier

Following a strong start, the benchmark indices — the Sensex and the Nifty — extended their rally to register new highs. However, profit-booking at higher levels capped the gains in the latter part of the week.

With the real GDP growth for the July-September quarter slumping to a 26-quarter low of 4.5 per cent, markets could remain jittery, and further erosion of last week’s gains is possible.

So, investors should remain cautious in the coming week. November auto sales number, the upcoming monetary policy meeting and rupee movement will also need a watch. On the global front, the progress of the US-China trade talks and the US November employment report will need monitoring.

Nifty 50 (12,056)

Last week, the Nifty managed to scale higher and record a new high at 12,158 on Thursday. But it gave up some of the gains as it fell 0.78 per cent on Friday due to weak global cues and profit-booking at higher levels. The Nifty surged 141 points, or 1.2 per cent, last week. Although the index closed above 12,000, it still continues to test the psychological resistance.

A rally above 12,100 can take the index higher to 12,200. However, the upside is temporarily limited to 12,200. An emphatic break above 12,200 is required to take the index higher to 12,400 and 12,500 in the short-to- medium term. The daily moving average convergence and relative strength indices (RSI) are displaying negative divergence, indicating that a trend-reversal is on the cards.

The weekly indicators are giving mixed cues. A conclusive plunge below the key short-term support level of 11,800 will confirm the reversal and drag the index down to 11,700. A further decline below this level will start weakening the short-term uptrend that has been in place since early October.

The next supports for the index are pegged at 11,550 and 11,440,

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