Trade setup for today: Asia mixed; FIIs net sellers; Nifty 24K is the key

All you need to know before the market opens on Wednesday: GIFT Nifty hints at 100-pt gap-up start. US market bounce back as tech shares gain; Japan down in Asian trade; FIIs net sell in cash and F&O.

Trading guide for Wednesday August 7, 2024: The NSE Nifty 50 is likely to start trade on a positive note taking cues from its counterpart GIFT Nifty.

At 07:00 AM, GIFT Nifty futures quoted around 24,170 levels – hinting at a likely 100-point gap-up on the NSE Nifty 50 index.

Yesterday, the Sensex gave-up over 1,000-point intra-day gain, and the Nifty faltered after nearing 24,400 levels as the underlying nervous mood in global markets weighed on the investor sentiment.

Today, the market will be hoping for some stability as Asian shares hold steady. The focus will also partly shift to the upcoming RBI policy meeting outcome on Thursday and the weekly Nifty expiry.

 

Global cues
 

Overnight in the US, equity market bounced back as tech stocks rose. The S&P 500 and NASDAQ rallied 1 per cent each, while Dow Jones added 0.8 per cent.

The US 10-year bond yield inched higher to 3.887 per cent. Whereas, Gold futures dipped to $2,425 levels; while WTI Crude Oil futures quoted around $73 per barrel. Among other base metals, Aluminium prices gained up to 2 per cent, while Copper and Zinc slipped around 1 per cent.

This morning in Asia, Japan’s Nikkei was down 1.3 per cent. Kospi and Straits Times, however, gained over 1 per cent each, while Taiwan too added 0.8 per cent.

Trading strategy for Nifty, Bank Nifty on Wednesday August 7, 2024

Om Mehra, Technical Analyst, SAMCO Securities

The Nifty slipped below the critical 24,000 level, which had previously served as strong support. The 50-day moving average (DMA) hangs around the 23,900 level. The unfilled gap could act as resistance around the 24,350 zone.

The primary trend in Nifty appears weaker, and any bounce toward the 24,100-24,150 range might present a selling opportunity in the short term. The immediate support is seen at the Fibonacci retracement level of 127.8 per cent, which is around 23,800.

The Bank Nifty has formed a bearish daily candle with a large body. The index is hovering around the 50 per cent Fibonacci retracement level, which remains around 49,700 and a slip below this level might extend the decline towards the 49,200-49,100 range.

The index remains below the 20-day and 50-day moving averages (DMA). To regain upward momentum, the Bank Nifty needs to decisively break above the 50,450 mark.

Dhupesh Dhameja, Technical Analyst, SAMCO Securities

On the daily chart, Nifty closed just above the 50-day moving average and marginally below the critical 24,000 mark. The Relative Strength Index (RSI) is near the 40-support level, which has been a reliable support over the last nine months. The 75-minute chart indicates a bullish divergence following the selloff, suggesting a potential rebound, if the index stays above 23,850.

The outlook remains oversold as the Nifty faces selling pressure due to global factors. However, with the index near its 50-day moving average, a fallen PCR to 0.48, and RSI support at 40 levels, a bounce back is possible. Sustaining above 23,850 could see the index reaching 24,350.

The Bank Nifty has retraced 50 per cent of its recent rally and is trading near its 100-day exponential moving average. On the 1-hour chart, the Relative Strength Index (RSI) is hovering near the extreme levels of 25-28, indicating a potential bounce back. Strong put writers are positioned at the 49,500 level.

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

Technically, the Nifty has formed a red candle on the daily scale and is still holding below bearish gaps. As a result, the index is likely to face resistance near the 24,690 and 24,960 levels. Sustenance below 24,000 will likely trigger further selling pressure in the index. On the downside, 23,600 and 23,300 will provide significant support for the Nifty in the immediate term.

The Bank Nifty had tried to cross the recent breakdown point but failed to sustain above it. Thus, 50,400-50,600 will act as a major resistance zone for the Bank Nifty, while 49,500 and 49,000 will provide short-term support for the index.

Rajesh Bhosale, Equity Technical Analyst, Angel One

Technically, there hasn’t been a significant change in price levels, but from the morning highs, the momentum is clearly with the bears, who are using any bounces as opportunities to sell. On the daily chart, prices remained within the range of the previous candle, which now serves as a key trading range. 

The lower end of Monday’s candle aligns with the 50 EMA, while the upper end coincides with the 20 EMA and a bearish gap. Although the momentum favors the bears, the hourly indicators are in the oversold zone, suggesting a possibility of intermittent rebounds cannot be ruled out. Therefore, any such bounces, similar to today, should ideally be viewed as selling opportunities.

As for key levels, 24,250 appear to be immediate resistance, while the 24,350 – 24,400 range remains a challenging barrier for the bulls. Only a close above this range could potentially revive some positive momentum in the market. On the downside, immediate support is seen at 23,900 – 23,850, below which the Nifty may slip towards the 23,600 – 23,550 levels.

Rupak De, Senior Technical Analyst, LKP Securities

The Nifty formed an inverted hammer pattern on the half-hourly chart, suggesting a possible bullish reversal of a smaller degree. Also, the index seems to have found support above Monday's low. Now, two things might happen: one, the Nifty might recover towards 24,400 – 24,440 (21EMA), where selling pressure is likely to occur once again; or, it might fall straight away to 23,965 (50EMA)/ 23,650.

Where is the big money moving? Here’s an update on the latest FII, DII trading activity

On Tuesday, foreign institutional investors (FIIs) net sold stocks to the tune of Rs 3,531.24crore. On the other hand, domestic institutional investors (DIIs) net bought shares worth Rs 3,357.45 crore.

In the derivatives segment, FIIs net sold 31,466 contracts of index futures for a consideration of Rs 2,031.16 crore on August 6. FIIs net sold 21,078 contracts of Nifty futures; 9,317 contracts of Bank Nifty futures and were net buyers of 292 contracts of MidCap Nifty futures.

Pursuant to which, FIIs long-short ratio in index futures stood dropped to 1.4:1. This ratio implies that foreign investors hold near about 3 long positions in index futures for every 2 bets on the short side of trade. The FIIs longs in index futures stood at 57.40 per cent.

Stocks in F&O ban period

Aditya Birla Capital, Birlasoft, Chambal Fertiliser, GNFC, Granules India, Hindustan Copper, India Cements, IndiaMart, LIC Housing Finance, Manappuram Finance and RBL Bank are the 11 stocks in the futures & options (F&O) ban period on Wednesday. 

New listings 

Utssav Cz Gold Jewels to debut on the NSE SME platform today. Grey market premium data indicates a rather quiet debut for the stock.

Primary market update

Brainbees Solutions, the parent company of FirstCry, IPO was off to a slow start with less than 10 per cent subscription on Day 1 as per the NSE. Meanwhile, Unicommerce eSolutions IPO was subscribed 1.5 times.