Market outlook July 22: Nifty may open gap-down; Asian shares fall up to 2%

All you need to know before the market opens on Monday: Indian stocks to react to RIL, HDFC Bank and other Q1 results. Technical analysts see Friday's fall as a warning sign on charts; find out why.

Stock market preview, Monday, July 22, 2024: Equity markets are likely to start trading for the all-important Budget week on a tentative note amid weak cues from global peers and signs of profit-taking in our own market post the recent bull-run.

At 07:00 AM, GIFT Nifty futures quoted around 24,443, hinting at a likely gap-down of 80-odd points on the Nifty 50 index.

Stocks across sectors are likely to react to Q1 numbers announced post market hours on Friday and the weekly holiday Saturday. Prominent among these are Reliance Industries, HDFC Bank, UltraTech Cement, Wipro, Paytm and BPCL.

“Further, the market direction will be determined by upcoming Budget outcome. Investors are anticipating pro-industry and populist measures with prudence on fiscal. If the Budget meets the expectation, it will provide more stability in the market, said Vinod Nair, Head of Research, Geojit Financial Services in a note.

Global mood

On Friday, the US market ended in red as profit-taking continued in select chip stocks. Tonight, stocks will react to Joe Biden’s withdrawal from the US Presidential election race. Biden has endorsed Vice President Kamala Harris to replace him as the party's candidate. READ MORE

That apart on the economic front, investors will focus on the advanced Q2 growth forecast slated to be announced on Thursday; followed by the June Personal Consumption Expenditures index reading on Friday.

The US 10-year bond yield quoted around 4.22 per cent. Among commodities, Gold futures eased to $2,410 levels. Brent Crude Oil futures dipped to $83 per barrel.

Equity markets in Asia traded with significant losses. Japan’s Nikkei and Malaysia’s Kospi slipped over 1 per cent each, while Taiwan tumbled more than 2 per cent. 

FII, DII trading activity

Foreign institutional investors (FIIs) net bought shares to the tune of Rs 1,506.12 crore in the cash market on July 19. Domestic institutional investors (DIIs), on the other hand, were net sellers of stock worth Rs 461.56 crore on Friday.

In the derivatives segment, FIIs net sold 32,067 contracts of index futures, for a consideration of Rs 2,029.13 crore on Friday. FIIs net sold 25,522 contracts of Nifty futures, and 3,481 contracts of Bank Nifty futures.

Pursuant to which, FIIs index futures long-short ratio declined to 3.7:1. This ratio signifies that FIIs hold near about 4 long positions in index futures for every bet on the short side. The FIIs longs in index futures dropped to 78.85 per cent, while shorts rose to 21.15 per cent.

On the other hand, DIIs and retail investors’ index long-short ratio continued to remain around 0.5:1; meaning 2 index short bets for every long trade. 

Trading strategy for Monday, July 20 - Should you be a buyer or seller in the Nifty, Bank Nifty today? Here’s what market experts recommend:

Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities

The Nifty has formed a bearish engulfing on the daily chart, which is considered to be a bearish reversal signal. Strong call writing was observed at the 24,600 & 24,700 Strike in Nifty. The put writers (Bulls) are holding sizeable positions at the 24,500 Strike and the option activity at this strike will provide cues about Nifty’s future direction.

On the Bank Nifty, put writers’ (Bulls) exit and call writing was observed at all strikes from 52,500 until 52,700 on Friday. A decisive breakout on either side of the 52,100-52,700 range will provide cues about Bank Nifty’s future direction.

Om Mehra, Technical Analyst, SAMCO Securities

The Nifty currently is holding the support of a rising trendline on the daily time frame. The 10-EMA stands at 24,450, and if this level is violated there might be short-term weakness. The bullish trend would be on hold unless the Nifty crosses the 24,680 level.

The Bank Nifty formed a bearish ‘Harami’ pattern on the daily candle which indicates short-term weakness. Bank Nifty is near its support zone which is around 52,100, and if this level is broken on a closing basis, it could extend towards the 51,700 zone. With the daily MACD indicator slightly skewed to the negative side, a sell-on-rise strategy would be suitable for the short term.

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates

Technically, the Nifty on a daily scale has formed a bearish engulfing candle and on a weekly scale, it has formed a shooting star candle, indicating weakness. Thus, as long as the index remains below 24,855, a sell-on-rise strategy needs to be adopted in Nifty.

On the daily scale, the Bank Nifty has formed an inside bar candlestick pattern. However, the index managed to defend the 21-DEMA support of 52,030 levels. Thus, Bank Nifty will find strong support near 52,000 levels. On the upside, 52,800 and 53,000 will serve as strong resistance levels."

Osho Krishan, Senior Analyst - Technical & Derivatives, Angel One

From a technical perspective, it is worth noting that Nifty has formed a ‘Shooting Star’ on a weekly time and a ‘Bearish Engulfing’ on a daily time frame at record highs. This could potentially signal a shift in the trend or a temporary pause in the current upward momentum for the Bulls of the D-Street.

As far as levels are concerned, a sustainable plunge below 24,500 is likely to provide some more respite to the benchmark for a potential downside to 24,300-24,200 (20 DEMA) on an intermediate basis, while the sacrosanct support lies at 24,000 mark.

Stocks in F&O ban period

A total of 9 stocks are in futures & options (F&O) ban period on Monday – Balrampur Chini, Bandhan Bank, GMR Infra, Hindustan Aeronautics, Hindustan Copper, India Cements, Piramal Enterprises, SAIL and Vedanta. 

New listings 

4 new stocks are slated to list on the bourses today. Prizor Viztech and Sati Poly Plast to list on the NSE SME platform; both stocks are expected to debut at the maximum premium limit set by exchanges i.e. 90 per cent above the issue price indicated grey market premium.

Aelea Commodities and Three 3 Paper Board will be listed on the BSE SME platform. The former was seen quoting with a premium of up to 80 per cent, and the latter up to 40 per cent.

Primary market update

SAR Televenture Rs 150 crore and RNFI Services Rs 70.81 crore SME IPOs to open for subscription on the NSE. The former IPO is priced at Rs 210 and the latter at Rs 105 at the higher-end of the IPO price band.

Sanstar IPO to remain open for subscription for the second day on Monday.