Stock Market Overview
On Friday, the Sensex and Nifty 50 indices continued their downward trajectory, marking their fifth consecutive session of declines. This trend has led to their most significant weekly losses in over two years, primarily driven by escalating tensions in the Middle East and a notable increase in foreign capital outflows. The market’s negative sentiment reflects growing investor concerns regarding geopolitical instability.
Market Performance
As of the latest trading session, the Nifty 50 index fell by 0.93%, closing at 25,014.6, while the Sensex retreated by 0.98% to finish at 81,688.45. Over the course of the week, both indices experienced a significant decline of approximately 4.5%, which represents the steepest drop since June 2022, following a substantial 2% plunge on Thursday.
Investor Sentiment
Bearish sentiment continues to dominate the market as investors react cautiously to the ongoing tensions in the Middle East. Vinod Nair, Head of Research at Geojit Financial Services, noted that many investors are opting for a “sell-on-recovery” strategy. While surging crude oil prices might be tempered by increased production from OPEC+, market pessimism is expected to persist, especially with a noticeable shift of funds towards more affordable markets like China.
Upcoming Events to Watch
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting, set for October 7 to 9, 2024, is another critical event for investors to monitor. Analysts predict that the RBI will likely maintain the benchmark repo rate at 6.5%, unchanged from its previous nine meetings through August 2024. This steadfastness will be closely scrutinized by market participants.
Second-Quarter Earnings
Additionally, the second-quarter earnings season is about to kick off, with major corporations like TCS, Tata Elxsi, DMart, and IREDA set to report their results. These earnings announcements can significantly impact individual stock movements and overall market dynamics.
Expert Market Insights
According to Dharmesh Shah, Vice President at ICICI Securities, the Nifty 50 index has snapped a three-week winning streak primarily due to the surging geopolitical tensions, resulting in a substantial decline of 4.3% at 25,050. The index began the week negatively and faced intensified selling pressure after breaching the critical support level of 25,800.
Support and Resistance Levels
In the upcoming week, strong support for the Nifty 50 is positioned at 24,800. If the index can maintain levels above this support, the potential for a rebound remains intact. Market volatility is expected to be high as developments concerning geopolitical tensions, the RBI Policy, and the commencement of the Q2 FY25 earnings season unfold. A decisive drop below 24,800 could trigger further declines, potentially reaching 24,400.
Long-Term Market Trends
Historically, during the calendar year 2024, the index has not seen corrections exceeding 5-6%, typically holding around its 50-day Exponential Moving Average (EMA). Current indicators suggest that the index has approached its 50-day EMA amidst oversold conditions. A decisive close above the previous session’s high could signal a pause in the ongoing downward momentum, potentially paving the way for a rebound towards 25,500 in the near future.
Key Sectors to Watch
Sectorally, analysts expect sectors such as Information Technology (IT), Metals, and Pharmaceuticals to outperform. Conversely, areas like Banking, Financial Services, and Insurance (BFSI), as well as Capital Goods and Oil & Gas, present attractive buying opportunities.
Recommended Stocks
This week, investors are advised to consider buying NTPC within the price range of ₹420-432, targeting a price of ₹485 with a stop loss set at ₹394. This recommendation aligns with growing market interest in reliable, fundamentally strong companies.
Conclusion
The stock market outlook remains cautious amid ongoing geopolitical uncertainties and evolving economic indicators. Investors are encouraged to stay vigilant and informed as market conditions can change rapidly, impacting their investment strategies and decisions.
