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Pre-market update for Indian stock market Friday, May 31, 2024: Equity markets in India will be hoping for some respite from the five-day fall, with the monthly F&O expiry out of its way.
The S&P BSE Sensex and the NSE Nifty 50 benchmark indices have declined 2 per cent and 2.7 per cent from their respective summits at 76,010 and 23,111, hit earlier this week. The selling was attributed to lingering concerns about higher-for-longer interest rates in the US and uncertainty around the election outcome.
However, onset of the monsoon in India and steady cues from Asian peers may help the benchmarks recoup some of the lost ground.
On Friday at 07:00 AM, Gift Nifty futures quoted around 22,700 levels, indicating a possibility of over 100-point gap-up on the Nifty 50 index.
Early onset of monsoon
The southwest monsoon set in over the Kerala coast and parts of the Northeast earlier than the forecast, marking the start of its four-month journey over India. An early and timely onset of monsoon is also a good sign for 2024 kharif crop production.
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In the last leg of the seven-phased Lok Sabha elections in India, voters from parts of 8 states and Union Territories, including Himachal Pradesh, Bihar, Uttar Pradesh, West Bengal and Punjab shall cast votes.
Exit Polls will be out from June 01 onwards.
Fund flow action
Foreign institutional investors (FIIs) net sold stocks to the tune of Rs 3,050 crore on Thursday, whereas; domestic institutional investors were net buyers of shares worth Rs 3,433 crore.
Moreover, in the derivatives segment, FIIs long-short ratio in index futures dropped to a record low of 0.15, with short index futures at 87.13 per cent, NSE data shows. On the other hand, retail investors’ index long-short ratio rose to 2.24, with 69.1 per cent index longs.
Global mood
Overnight, the US market extended fall amid concerns over a delayed rate cut. Dow Jones and Nasdaq slipped around 1 per cent each, while the S&P 500 was down 0.6 per cent.
The US 10-year yield remained above 4.5 per cent. Among commodities, Gold futures bounced back to $2,360 levels, while Brent Crude Oil eased to $81.50 levels.
In other news, former US President, Donald Trump on Thursday became the first former US president to be convicted of a felony as a grand jury in New York found him guilty on 34 counts of falsifying business records.
Markets, in the Asia-Pacific region, rose in tandem. The Australian benchmark indices, Japan’s Nikkei and Kospi were up 0.7 per cent each.
Trading strategy for Friday, May 31 - Should you be a buyer or seller today? Here’s what market experts recommend:
Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One
The Nifty has now tested the 50 per cent Fibonacci retracement of the rally we witnessed from the lows of 21,820 to the lifetime high, a significant sign of caution. For now, 22,450-22,400 seems to be the last hope for the bulls, as any decisive breakdown is likely to disrupt the technical structure in the comparable period.
On the higher end, 22,600-22,620 is expected to be seen as an intermediate hurdle, followed by the sturdy wall of 22,800 in the short term.
Neeraj Sharma, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates
Technically, the Nifty has experienced substantial profit booking with the formation of a dark cloud cover candlestick pattern at top and the breach of the 21-DEMA support level near 22,560. However, the index found support at the 50-DEMA (22,386) and had a pullback towards the finish.
Thus, 22,400-22,380 will serve as immediate support zone for the Nifty, followed by 22,000, while 22,800 and 23,110 will operate as significant barriers in the short term.
The Bank Nifty managed to defend the support at 48,000 levels and witnessed a recovery. Technically, the Bank Nifty has defended the support of the 21-DEMA at 48,403 and found resistance near 49,000-49,050 levels. If the index sustains above 49,050, then the rally could stretch towards 49,690 and 50,000 levels .
Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities
The Nifty has given a consecutive lower close (close below previous day low) on the daily chart. Strong call writing (Bear activity) was observed at the 22,500 Strike in Nifty. The call writers (Bears) still have sizeable positions at the 22,500 Strike and the option activity at this strike will provide cues about Nifty’s future direction.
In case of Bank Nifty, the put writers (Bulls) held on to the 48,500 Strike in Index. Call writers (Bears) exited from the 48,400 Strike leading to a steady up move in the Index. Bank Nifty is likely to continue its fall if put writers (Bulls) exit from the 48,500 Strike. Hence, the option activity at the 48,500 Strike will provide cues about Bank Nifty’s future direction.
Om Mehra, Technical Analyst, SAMCO Securities
If the Nifty breaks below the weekly low of 22,404, it could slide further to the 22,300-22,320 zone. Any pullback rally towards 22,620-22,650 should be seen as a selling opportunity. However, a decisive close above 22,700 would turn Nifty bullish.
The Bank Nifty, despite opening lower, the index recovered to test the 49,000 level, filling the gap from the previous session but was unable to sustain that level. The immediate support remains at 48,300, followed by 48,000 while resistance is placed in the 49,000-49,100 zone, aligning with the mean of the regression channel.
Rupak De, Senior Technical Analyst, LKP Securities
The short-term sentiment remains weak, as the Nifty has slipped below the critical 21-day Exponential Moving Average (21EMA). Call writing activity was significant at 22,500. Therefore, to witness a meaningful recovery, the Nifty needs to sustain above 22,500. However, failure to move above 22,500 might attract fresh selling in the market, potentially driving the index towards 22,300/22,100 levels.
Stocks in focus
Electric-vehicle related stocks: The NSE on Thursday launched a new thematic index called Nifty EV & New Age Automotive index. The 33-stock index will track the performance of companies which form a part of the electric vehicle (EV) ecosystem, and led by stocks such as Bajaj Auto, Tata Motors, Mahindra & Mahindra and Maruti Suzuki.
Hero MotoCorp: The two-wheeler major’s financial services arm, Hero FincCrp is planning an IPO. The maiden share sale will comprise Rs 4,000 crore fresh fund raise and also an offer for sale.
Jio Financial Services: The RIL-group firm yesterday launched ‘JioFinance’ app in beta mode, which will offer a range of financial services and will also offer loans against mutual funds among other services in the future.
