The market may remain volatile ahead of the second quarter earnings season and the end of October F&O. Nifty and Sensex saw profit-booking after hitting their new all-time highs of 18604 and 62245 respectively, however Bank Nifty is in a different mood and continues its rally with a fresh high of 40587. A sectoral rotation is visible where money is moving from some expensive valuation stocks to banking names as the valuations and strong earnings rest. The FMCG sector was the biggest dragger last week with over 6% cut after earnings disappointment with HUL and Asian Paints.
Talking about the numbers, both FII and DII are in selling mode. FII price sold ₹Last week, the cash market sold Rs 7350 crore and DII sold Rs 4505 crore. The index has a long exposure of 62% to FIIs in the future, while the PCR is sitting at 0.82, which is an oversold area and could lead to a short-covering bounce in the market.
Technically, Nifty formed a dark cloud cover candlestick formation on the weekly chart indicating a short term reversal but we will have to wait for the follow-up to confirm. On the daily chart, it is trading near an important support area of the 18000-17950 area, where we can expect a return. On the upside, 18250-18300 will be the immediate supply zone while 18400-18450 will be the next resistance zone. If Nifty slides below the level of 17950 then there is a risk of any meaningful correction where 17600 will be the next important support level.
Bank Nifty is outperforming however 40500 is a key hurdle as it coincides with trendline resistance on monthly chart where we can see some profit booking but if it manages to stay above this level then we could trade 41000/41500 Another rally can be expected towards the level. On the downside, 39500-39300 is an immediate and strong support area, below this 38800-38500 will be the next important support area.
If we talk about the signals of the next week, then the next batch of earnings season and the F&O expiry of October may give volatility in the market. Markets will react to the earnings of Reliance Industries and ICICI Bank on Monday while Tech Mahindra, Ambuja Cement, Axis Bank, Bajaj Finance, Cipla, Kotak Bank, Adani Ports, L&T, Bajaj Auto, ITC, IndusInd Bank, Maruti Suzuki, SBI Life Insurance , Titan, DLF, Indigo, Tata Power, Dr Reddy’s, GAIL, Vedanta, etc. will come out with their earnings during the week.
The primary market will be active again with the opening of Nykaa’s IPO on October 28. If we discuss other important signals, then the behavior of institutional investors will be important as they have been selling continuously for the past few days. Global crude oil prices continue to rise, which is a cause of concern for markets like India, and an increase in US bond yields may also worsen the mood of the global equity market.
Santosh Meena is Head of Research at Swastika Investmart Ltd.
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