It was the fifth consecutive week of losses and the second consecutive week of deep austerity measures for the Indian stock market. Inflation and monetary tightening concerns around the world are major concerns for equity markets. The stock markets are under a strong hold of bears. However, they look extremely oversold and are due for a pullback rally. The sell-off in the US market, particularly in technology stocks, has been very severe and there is some stability in the last two trading sessions that may provide some calm for the bulls.
There are no major signals for the week ahead; therefore, the direction of global signals will be important and some stock-specific moves will continue toward the end of earnings in the fourth quarter. On the domestic front, the listing of LIC’s IPO will be a major sentimental trigger for the Indian stock market.
FIIs sell relentlessly while DIIs try to make up for their sales; therefore, their behavior will also play an important role towards the market. The movement of the dollar index, the price of crude oil and the direction of the rupee will be other important factors.
Looking at the derivatives, FII’s long exposure to index futures stands at 24% and the put-call ratio stands at 0.73; both are in extremely oversold territory.
Technically, the Nifty is trading near the previous swing low of 15670 and most momentum indicators are trading in oversold territory; therefore, we can expect a recovery towards 16180/16400 levels, while if the Nifty dips below the 15670 level, selling pressure could build towards 15500/15000 levels.
Bank Nifty also continues its journey south and 33000 is an immediate psychological support level where we can expect some recovery, while below the 33000 level 32000 will be the next major support level. On the upside, 34000/34500/35000 will be a major hurdle.
Santosh Meena, Head of Research, Swastika Investmart Ltd.