Market outlook July 25: Global sell-off hints at 200-pt gap-down on Nifty

All you need to know before the market opens today: Dow, NASDAQ fall up to 3.6 per cent on Tesla, Google earnings disappointment; Nikkei slides 2.7 per cent. GIFT Nifty quotes near 24,200 levels.

Stock market preview, Thursday, July 25, 2024: Just a couple of trading sessions after the Union Budget, equity benchmark indices in India today will brace-up to weather a sell-off in the global market.

At 07:00 AM, GIFT Nifty futures quoted around 24,227, indicating a likely 200-odd point crack at the opening bell on the Nifty 50 index.

Global mood

Overnight in the US, NASDAQ nose-dived 3.6 per cent following disappointing results from Tesla and Google. The S&P 500 crashed 2.3 per cent, while Dow Jones fell 1.3 per cent. Tonight, the focus will be on advance Q2 GDP estimates.

The US 10-year bond yield quoted around 4.266 per cent. Among commodities, Gold futures dipped to $2,390 per ounce levels, while Brent Crude Oil futures languished around $81 per barrel.

 

Asian markets were seen tracking cues from the US peers. Japan’s Nikkei plunged 2.7 per cent, and Kospi tumbled 1.9 per cent. Straits Times was down 0.5 per cent.

FII, DII trading activity

Foreign institutional investors (FIIs) net sold stocks worth Rs 5,130.90 crore in the cash market on July 24. Domestic institutional investors (DIIs), on the other hand, were net buyers of shares to the tune of Rs 3,137.30 on Wednesday.

In the derivatives segment, FIIs net sold 43,058 contracts of index futures, for a consideration of Rs 3,588.37 crore yesterday. FIIs net bought 14,437 contracts of Nifty futures, while were net sellers of 61,286 contracts in Bank Nifty futures.

Pursuant to which, FIIs index futures long-short ratio dropped to 2.2:1 as compared to a high of 5.2:1 on July 05. This ratio now signifies that FIIs hold fewer than 2 long positions in index futures for every bet on the short side. The FIIs longs in index futures dropped to 68.84 per cent, while shorts rose to 31.16 per cent.

On the other hand, retail investors added fresh long positions in index futures, the long-short ratio rose to 0.87- the highest since June 19. DIIs long-short ratio continues to remain around 0.5:1; meaning 2 index short bets for every long trade. 

Trading strategy for Thursday, July 25 - Should you be a buyer or seller in the Nifty, Bank Nifty today? Here’s what market experts recommend:

Dhupesh Dhameja, Technical Analyst, SAMCO Securities

The Nifty struggled to close above its 10-day Exponential Moving Average (DEMA), remaining trapped between the 10 and 20 DEMAs, and failed to surpass its previous peak. This breakdown in the rising trendline indicates waning momentum behind bullish sentiment.

Options Market Analysis 

Significant open interest is seen at the 25,000 call and 24,000 put options, with notable trading interest in the 24,400 puts and 24,500-24,600 calls. The Nifty Put-Call Ratio (PCR) has declined from 0.95 on Tuesday to 0.76, indicating a decreasing preference for puts over calls. The max pain level is positioned at 24,400, anchoring the index's movement.

Nifty Outlook

Based on current data and market sentiment, a bearish outlook will prevail if the Nifty sustains below the 24,300 level. Immediate support lies at 24,300, with crucial resistance at 24,550. If the index falls below 24,300, the next downside target is 24,190. To resume upward momentum, the index needs to sustain above 24,550.

Bank Nifty

On the daily chart, the Banking Index broke down from its consolidation zone and closed below it, maintaining a gloomy outlook. 

Options Market Analysis 

In the options market, key levels of interest include significant open interest at the 51,400 calls and 51,200 puts. Notable trading activity was observed in the 51,400 and 51,300 calls, as well as the 51,200 puts. The Index Put-Call Ratio (PCR) has decreased to 0.92, indicating a rising preference for calls and reflecting sentiment favoring further downside movement.

Market Outlook

Based on current data and prevailing market sentiment, the outlook remains bearish for Bank Nifty. The index has broken out of its range and is trading below its 20-day Exponential Moving Average (DEMA).

Investors are advised to adopt a sell-on-rise strategy. Immediate resistance is at the 51,700-51,800 levels, with 51,300 acting as crucial support. If the index fails to sustain above 51,300, further correction is likely, with the index potentially dropping to 50,800.

Om Mehra, Technical Analyst, SAMCO Securities

The Nifty needs to cross the 24,600 level in order to resume the uptrend.

The Bank Nifty has moved below its short-term 10 and 20-day moving averages (DMA). The 50-day moving average, around 50,600, serves as an important support zone for the next session. The daily RSI at 45, significantly below the neutral 50 level, indicating a diminishing bullish momentum. Bank Nifty is likely to remain weak unless it crosses the 52,100 mark.

Rajesh Bhosale, Equity Technical Analyst, Angel One

Technically, not much has changed on the Nifty daily chart structure. It has been observed that some support formation is happening around the 20 EMA, currently placed in the 24,250 – 24,300 zone. Prices have bounced twice from this key average since budget day, making it a sacrosanct point for the bulls going forward.

For the monthly expiry session, we expect Nifty to continue trading within a range. As highlighted, the 24,300 – 24,250 zone is likely to act as support, below which the panic low of 24,050 from the budget day could be retested. On the flip side, the high of the last two sessions around 24,600 seems a stiff hurdle, whereas the bearish engulfing high of 24850 remains a daunting task to cross.

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

Technically, the Nifty on a daily scale has formed a small bearish candle following the formation of a hammer candle yesterday. Thus, the 24,070-24,000 range will act as a demand zone for the Nifty in the short term. On the upside, the high of the bearish engulfing candle is placed near 24,855. Until the index conquers these levels, a fresh rally appears difficult for the index, in the short term.

The Bank Nifty has retested its previous breakout from the rounding bottom pattern and managed to close above it. Moreover, the index has respected the 50-DEMA support, which is placed near 50,950. As long as the index holds above the 51,000-50,950 levels, a short-term relief rally cannot be ruled out. 

Rupak De, Senior Technical Analyst, LKP Securities

The Nifty continues to remain volatile with a mild negative bias. On the daily chart, a small-bodied red candle has formed. However, the short-term trend remains positive as it closed above the 21-day exponential moving average. The Relative Strength Index (RSI) is showing a bearish crossover and is declining. Weakness might increase in the market in the short term if the Nifty falls below 24,350. On the higher end, resistance is seen at 24,600. 

The sentiment might remain weak for the Bank Nifty as it closed below its support level of 51,700 and its 21-day exponential moving average. A sell-on-rise approach might favor traders until the index closes above 52,000. The support is placed at 50,900, where the 50-day EMA lies. On the other hand, resistance is seen at 51,550 and 52,000.

Stocks in F&O ban period

Voda Idea and India Cement are the only two stocks in the futures & options (F&O) ban period on Thursday. 

Primary market update

Two more SME IPOs - Aprameya Engineering (Rs 29.23 crore) and Trom Industries (Rs 31.37 crore) to open for subscription on the NSE today. Meanwhile, Clinitech Laboratory (Rs 5.78 crore) IPO to open for subscription on the BSE SME platform. 

Chetana Education and Mangalam Infra and Engineering issues were subscribed 2.6 times and 13.1 times at the end of Day 1 of the offer period. VL Infraprojects was subscribed 162.8 times at the end of Day 2 of the offer period.

On the BSE - VVIP Infratech IPO was subscribed 91.4 times as of yesterday.