 "Stock market guide Jun 06: Gift Nifty flat; Global shares up as yields dip")
Pre-stock market update for Thursday, June 06, 2024: The election related volatility may start to subside with concerns related to formation of the new NDA government put to rest. The market may now shift its focus towards the Nifty weekly expiry, RBI policy outcome on Friday and anticipated sector rotation with rural economy coming in focus.
FMCG stocks in particular have outperformed the market in recent days.
Vincent KA, Research analyst, Geojit Financial Services said, the FMCG sector is now showing signs of a gradual recovery in rural demand, driven by a reduction in inflation and strategic measures by companies to boost volumes. Additionally, the prospects of a better monsoon and potential policy shifts towards social economics could further enhance rural demand.
Commenting on the RBI policy expectation ,Vinod Nair, Head of Research, Geojit Financial Services said the market does not expect any change in RBI’s policy stance given persistent high food inflation, and an expectation of an increase in government spending.
At 07:00 AM, Gift Nifty futures quoted around 22,670 levels - indicating a likely quiet start to the trading action on the NSE Nifty 50 index.
Nifty weekly expiry
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The Nifty weekly options PCR (Put Call Ratio) stands at 0.61, indicating higher open interest (read positions) in call options as against put options. The 23,000 and 23,500 Calls have the maximum (OI). On the other hand, the 22,000 and 21,500 Puts have maximum OI.
Fund flow action
Foreign institutional investors (FIIs) remained heavy sellers for the second straight trading yesterday. FIIs net sold stocks worth Rs 5,656 crore on Wednesday, while domestic institutional investors (DIIs) net bought shares to the tune of Rs 4,555 crore.
In the derivatives segment, FIIs pared some index short positions, but the overall index long-short ratio remained fairly bearish at 0.21. At the end of trading on June 05, FIIs held 82.51 per cent short positions in index futures.
On the other hand, retail investors pared some long positions in index futures, but continue to hold 67.05 per cent longs in index futures, and 91.72 per cent longs in stock futures.
Global mood
Overnight, the US market rallied, with the S&P 500 and Nasdaq hitting fresh record highs amid rising hopes of Fed rate cut post subdued jobs data. The S&P 500 jumped 1.2 per cent, while Nasdaq soared 2 per cent. Dow Jones ended 0.3 per cent higher.
The US 10-year yield eased to 4.28 per cent. Among commodities, Gold futures rallied past the $2,380 levels, while Brent Crude Oil rose above $78.50 per barrel.
Equity markets, in the Asia-Pacific region, traded with a bullish bias on Thursday. Japan’s Nikkei rose over 1 per cent, while Taiwan added 0.6 per cent. Australia’s - All Ordinaries and the ASX 200 indices too were up 0.6 per cent each.
Trading strategy for Thursday, June 06 - Should you be a buyer or seller today? Here’s what market experts recommend:
Ruchit Jain, Lead Research, 5Paisa.com
The focus now would shift back to the broader trend, but there could be some stock specific rotation within this uptrend, where some of the sectors which had seen a sharp rally previously might see some consolidation.
As of now, the RSI on the daily chart is yet to give a positive crossover and thus this should be read as a pullback move. The hourly readings are positive and thus traders can trade with a positive bias with proper risk management.
Due to the sharp moves, the range has widened for the index where support for Nifty is placed around 22,000 – 21,800 while resistance is seen around 23,000 – 23,200.
Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities
Call writers (Bears) exiting and (additional) put writing was observed at all Nifty strikes from 21,500 until 22,200 which led to the sharp recovery in Nifty today. Strong put writing was observed at the 22,200 & 22,400 Strikes in the Index. The call & put writers fought fiercely at the 22,500 Strike and the option activity at this strike will provide cues about Nifty’s Intraday direction.
The 47,000, 47,500 & 48,000 Strikes on the Bank Nifty saw call writers (Bears) exiting and (additional) put writing. The call writers (Bears) have sizeable positions at the 49,500 Strike and the option activity at this strike will provide cues about Bank Nifty’s future direction.
Om Mehra, Technical Analyst, SAMCO Securities
The Nifty recovered strongly from Tuesday’s lower levels, and closed above the 50-day moving average, which remains around 22,430 levels. A slip below 22,400 could trigger a short-term sell-off while sustaining above 22,680 would likely resume the uptrend.
The Bank Nifty formed a bullish inside bar on the daily timeframe. The index concluded above its 20-day and 50-day moving averages. On the hourly chart, support is indicated at 47,300 levels, while resistance is placed at 49,650, followed by 50,050. A pullback towards the 48,500 zone presents a good buying opportunity for the short term traders.
Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One
The Nifty made an impressive gain of over 3 per cent on Wednesday and established itself above the 20-day Exponential Moving Average (DEMA) at the 22620 level.
Technically, the persuasion over the fall seems to be a constructive development and sustainability is likely to attract positive momentum in the primary trend. As far as levels are concerned, 22,500 – 22,400 is likely to cushion a short-term blip, followed by the strong support of the lower band of the channel placed around the 22,200 – 22,100 subzone. Additionally, 22,800 is expected to provide intermediate resistance, followed by a solid barrier at the psychological mark of 23,000.
Neeraj Sharma, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates
Technically, the Nifty has crossed the hurdle of the 100-Day Exponential Moving Average (100-DEMA) and formed an insider bar candlestick pattern on a daily scale. The 100-DEMA is placed near 22,050 levels. As long as the index holds above 22,050, bullish momentum will continue. On the upside, 23,000 and 23,350 will act as resistance in the short term.
The Bank Nifty has crossed the hurdle of the 100-DEMA and formed an insider bar candlestick pattern on a daily scale. The 100-DEMA is placed near 48,500 levels. The ongoing bullish move can stretch towards 49,700-50,000 levels as long as it holds above 47,500 levels.
Rupak De, Senior Technical Analyst, LKP Securities
For a bullish or bearish outlook, it's crucial to monitor key levels. If Nifty sustains above its 21-day EMA or 22,500, a buy-on-dip approach is advisable. Currently, 22,400 acts as support, while 22,800 serves as the initial resistance for the Nifty.