Domestic markets are expected to see a gap-down opening amid weak global cues due to geopolitical tension. Besides, regulatory changes among the F&O norms will also hit sentiment.
Dr Manoranajan Sharma, Chief Economist, Infomerics Ratings, said:“This escalation of the war, widening conflict and heightening of geopolitical tensions rocks the global scenario with incertitude and uncertainties.”
Nifty futures at Gift Nifty 25,700 signals a gap-down opening of over 250 points for Nifty, as Nifty futures on Tuesday closed at 25,970.
Most Asia Pacific stocks are closed while Japanese stocks (Nikkei) jumped over 2 per cent after its new prime minister, Shigeru Ishiba, indicated that the country’s economic conditions don’t support another rate hike.
Derivatives segment also paints a weak picture, said analysts.
Dhupesh Dhameja, Technical Analyst, SAMCO Securities, said: “The options market reflects a growing bearish sentiment, with call writing surpassing put writing for the second consecutive trading session. Significant open interest is observed at the 26,000 call (1.14 crore contracts) and the 25,000 put (77.97 lakh contracts), signalling resistance at 26,000. Increased put activity in the 25,600-25,700 range indicates that call writers are pushing prices lower. Additionally, unwinding of puts alongside the addition of calls highlights the dominance of bearish sentiment. The put-call ratio (PCR) has slightly increased to 0.77 from 0.69, reinforcing a cautious outlook as bears remain in control. Max pain stands at 25,750, marking a critical level for future movements”.
The Nifty index continues to exhibit bearish momentum, closing just below its immediate support level of 25,800, he said. “On the hourly chart, the index has failed to reclaim its previous highs from last two trading sessions, indicating strong selling pressure. Currently trading around the 0.382% Fibonacci retracement level at 25,705 from its recent rally, Nifty is still maintaining a higher-high and higher-low structure,” he further said.
Corporate downgrades moderated
Meanwhile, Care Ratings said thatCareEdge Ratings’ Credit Ratio, which measures the ratio of upgrades to downgrades, moderated to 1.62 times in H1FY25 down from 1.92 times in H2FY24. “Despite the moderate dip in H1, the credit ratio remained close to the 10-year average of 1.59. Overall, there were 215 upgrades and 133 downgrades across sectors in the first half, with export-oriented sectors like Textiles and Chemicals experiencing higher downgrades. The moderation in the credit ratio can be mainly attributed to the muted performance of the mid and small corporates, especially in export-oriented sector,” it said.
Analysts are also optimistic about the strong South West monsoon.
Elara Securities said the better performance of monsoons this year no doubt bodes well for sowing and agriculture produce prospects but high frequency data for rural India continues to be mixed.
“The terms of trade for rural India continue to drop, impinging its purchasing power. Incrementally, the real rural agriculture and non-agriculture wages have been de-growing this financial year. Recent changes in customs duty for edible oils and onions should help farmers get better realisation at the margin, but in the backdrop of weak price retaliations last year, this would be only consolatory. Per mandi price data, barring pulses, prices of all the crops have traded below MSP, as of end September 2024,” the report said.
With plateauing of urban demand, a gradual improvement in rural demand conditions is helpful, but may unlikely prevent a moderation in aggregate demand this year, raising risks of undershooting of growth for FY25, it cautioned.