The domestic markets are likely to build on the momentum as Gift Nifty is ruling strong at 25,075, well above Nifty futures Friday’s close of 24,915. Analysts expect the momentum to continue and advise traders to stay away from blind shorting, as no one is sure of market tops. All eyes are now on Nifty, whether it will cross the psychological 25,000-mark. Nifty on Friday closed at 24,834, a fresh all-time high. According to analysts, it will happen soon if not today.
Vinod Nair, Head of Research, Geojit Financial Services, said the Budget 2024-25 has not sparked any significant excitement in the market, while it was both populist and prudent. The increase in short- and long-term capital gains taxes added to the volatility on Budget day. Many of the measures are a reiteration of the interim budget, and the broader market appears to be losing momentum due to a lack of new impetus. “Although the government’s emphasis on fiscal discipline and growth is appealing, FIIs are cautious due to current high valuations and muted expectations for Q1FY25 results. Meanwhile, DIIs continue to employ a “buy on dips” strategy, which contributed to market gains on the week’s last trading day, particularly in the pharma, auto, metal, IT, and FMCG sectors,” he added.
The market has now recovered its losses from Budget day, driven by positive US GDP data and expectations of improved global demand. Moving forward, the direction of the domestic market will likely be influenced by the progress of the earnings season. Additionally, global economic updates, including the US Fed & BoE monetary policies, US employment data, and Eurozone GDP figures, are expected to impact market trends., he further said.
Market last week
In a weekly round-up, SBI Capital Markets said equity markets witnessed heightened volatility last week as market participants were caught off guard by an increase in long-term and short-term capital gains tax in the Union Budget 2024-25. Increase in STT on F&O was on expected lines as regulators were hinting at measures to curb speculative activity in the futures & options market. Robust liquidity in the hands of DIIs came in as a saviour and every dip was bought in.
Overall, during the week, Nifty50/Sensex/Nifty Midcap 100/Nifty Smallcap 100 indices were up by 1.2%/0.9%/3.3%/2.5% respectively.
On the basis of June 2024 quarter results, stock specific action was seen in companies where there was a beat (Indian Hotel, Ashok Leyland, United Spirits, etc.) or disappointment (Axis Bank, Tech Mahindra, etc.) on the earnings front and witnessed wild swing. So far, earnings season has not been that exciting and the scale is more tilted in the favour of disappointment. From the fund flow perspective, it said,
FIIs net sold ₹1,821 crore, while DIIs net bought ₹8,110 crore in the cash market during the week, the round-up summed up last week events.
Global markets rebound
Equities in the Asia-Pacific region are largely in the green. Following a strong close at the US markets last week on inflation data, Asian stocks are up about one per cent in early deals on Monday. However, Chinese stocks are down.
Analysts expect Indian stocks to remain firm on the back of global sentiment. F&O trading also indicates positive bias.
Dhupesh Dhameja, Technical Analyst, SAMCO Securities, said: Recent activities in the options market indicate a slight increase in bullish sentiment, with a greater focus on writing put options compared to call options. Significant open interest is observed at the 25,000 call (55.86 lakh) and 24,400 put (62.35 lakh) options. Notable trading interest is also seen in the 24,600-24,700 puts and 24,800-24,900 calls. The Nifty Put-Call Ratio (PCR) rose Friday to 1.27 from 0.95 on Thursday, reflecting an increased preference for puts over calls, as the market regains its bullish stance. The max pain level is positioned at 24,700, anchoring the index’s movement.
Volatility
The India VIX saw a 2.93% intraday decrease, settling at 12.24, down from 12.61 on Thursday. This decrease suggests market sentiments are turning positive, and volatility is expected to remain lower, he added.
Market Outlook
“Based on current data and market sentiment, a strong bullish outlook will dominate the Nifty. As the index closes above 24,750, sellers are likely to square off their positions, indicating that upward momentum is still intact. The view remains “buy on dips.” The support levels for the upcoming sessions are at 24,700 and 24,600, while resistance is expected at 24,900 and 25,000,” he further said.