On Wednesday, the Indian stock market is anticipated to open on a positive note, buoyed by gains observed in global markets and in anticipation of the Reserve Bank of India (RBI) monetary policy announcement. The key benchmark indices, Sensex and Nifty 50, have shown signs of recovery, marking a shift from the recent trend of declines.
The indications from GIFT Nifty are also reflecting a flat-to-positive beginning for the Indian indices. GIFT Nifty was trading around the 25,145 level, indicating a premium of nearly 15 points over the previous close of Nifty futures, further supporting a bullish outlook for the market.
Today marks a significant day as the Reserve Bank of India (RBI) is expected to release its monetary policy statement. With RBI Governor Shaktikanta Das at the helm, the Monetary Policy Committee (MPC) is widely believed to maintain the current repo rate, though a shift in policy stance is anticipated, which could influence market dynamics.
On the previous trading day, the domestic equity indices experienced a spike after six consecutive sessions of losses, underscoring a potential turnaround in market sentiment.
The Sensex surged by 584.81 points, or 0.72%, closing at 81,634.81, while the Nifty 50 recorded a rise of 217.40 points, or 0.88%, to settle at 25,013.15. This positive momentum has ignited discussions among analysts regarding the potential for a sustainable recovery.
The Nifty 50 formed a long bullish candle on its daily chart, suggesting that the market might be poised for an upward reversal. This development has kindled optimism among traders and investors alike.
Technical analysts have observed that Nifty 50 is in the process of forming a double bottom pattern around the 24,700 mark, which will need confirmation through additional upward movement. The recent bearish trend, characterized by lower lows and lower highs, was triggered when Nifty dipped below the swing low of 24,753 established on September 9, 2023. Hence, while the uptick is encouraging, market participants are advised to exercise caution.
Analysts suggest that the recent upturn could serve as a catalyst for bullish sentiment, leading to a potential reversal in the near-term downtrend.
“Achieving a decisive move beyond the 25,000 threshold may trigger the next layer of resistance between 25,400 and 25,500,” noted Nagaraj Shetti, a Senior Technical Research Analyst at HDFC Securities.
Nifty 50 Open Interest Analysis
In terms of Nifty open interest (OI) data, Mandar Bhojane, a Technical Analyst from Choice Broking, noted that the highest concentration of call-side OI is at the 25,200 and 25,500 strike prices. Conversely, the put-side OI is primarily centered around the 24,800 mark, indicating robust support around the 24,000 level for Nifty.
Nifty 50 Forecast
On October 8, Nifty 50 recorded a solid upward bounce, closing the session 217 points higher and forming a bullish harami pattern, signifying increased investor confidence.
“Despite the recent rally, Nifty has exhibited a ‘dead cat bounce’ from its low of 24,800, yet it has not exceeded the previous day’s high, highlighting ongoing weakness. Although momentum indicators show signs of recovery from an oversold status, the overall trend appears to be fragile. A bullish stance on Nifty 50 should only be adopted upon a close above 25,300, otherwise, a selling strategy may be more favorable,” advised Dr. Praveen Dwarakanath, Vice President at Hedged.in.
Data from options writers indicates a notable increase in call writing at the 25,000 level, reinforcing the sentiment that weakness in the index is likely to persist.
Aditya Agarwal, Head of Derivatives and Technical Analysis at Sanctum Wealth, anticipates that short covering may propel Nifty 50 further, with potential targets of 25,200 to 25,350 levels on the upside and strong support expected around 24,850 to 24,750 on the downside.
VLA Ambala, Co-Founder of Stock Market Today, predicts that Nifty 50 might trade within the 25,450 and 24,360 range in the upcoming trading sessions, indicating a consolidation phase.
Investors should note that the Nifty Relative Strength Index (RSI) is currently at 75, signaling potential overbought conditions. Therefore, a cautious approach is suggested, with a focus on stocks exhibiting strong Return on Equity (ROE), solid order books, and price-to-earnings (PE) ratios that align with or are below sector averages. As such, thematic investments may not be advisable at this time.
Ambala suggests that Nifty 50 is likely to encounter support levels around 24,880 and 24,670, while facing resistance near 25,230 and 25,350 during today’s trading session.
Bank Nifty Overview
The Bank Nifty index exhibited a short-covering surge, climbing by 542.10 points, or 1.07%, to close at 51,021.00 on Tuesday, reflecting a similar rebound to the broader market.
However, according to Dr. Praveen Dwarakanath, while Bank Nifty has bounced from support levels around 51,300, it has been unable to close above its previous highs, suggesting that weakness may continue. A close above 51,850 would indicate a potential trend reversal; until then, the recommendation is to adopt a ‘sell on the rise’ strategy.
Options data indicates increased call writing at the 51,000 level, suggesting that the index may remain below this threshold during today’s session.
As the market navigates these turbulent waters, keeping abreast of economic indicators and expert recommendations will be crucial for all investors. Remember, market conditions can change rapidly, and it’s essential to make informed decisions.
Disclaimer: The views expressed in this article are those of individual analysts and do not reflect the opinions of the publication. It is highly recommended that investors consult with certified financial advisors before making any investment decisions.
