The Nifty 50 Index witnessed a roller coaster ride with the onset of June 2024 as frontline indices swung sharply in both directions due to the predictions of the exit polls and the surprise outcome of the Lok Sabha election results 2024.
However, bullish players were back with a bang as soon as clarity emerged regarding PM-elect Modi and his allies coming to power with a coalition government. The recovery rally on Wednesday and Thursday came as domestic buying overpowered foreign sales leading to benchmark indices closing the week near all-time highs.
The Reserve Bank of India’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5 percent in its first meeting since Lok Sabha Elections 2024. The rate-setting panel decided to hold the key policy rate for the eighth consecutive time in its June 2024 meeting.
Post Market Weekly Analysis
The Nifty 50 weekly Index opened at 23337.90Â touched the high level of 23338.70 and slipped down to 22281.45 before closing at 23290.15. So the benchmark index oscillated in a range of 2057.25 points over the previous week's trading sessions, finally closing on a loss of 759.45Â points, i.e. in percentage term (3.37%) on a week-on-week basis.
Nifty 50 Index Monthly Chart
A candle with a long bullish rejection and closed above the previous month's candle, within 5 trading days of the month, shows that the June month could be interesting. It could make a new all-time high in unchartered territory and also can see the profit booking bouts on higher tops.
Nifty 50 Index Weekly Chart
The previous week was an unpredictable week for the stock market. It has seen more than 2050 points of oscillation. Now the coming week can be decisive week for investment purposes. After touching higher points, if the Nifty 50 Index tried to close below the highest level of this week which is standing at 23290, then we can see a big fall in the market which can go down to 20250, where the Nifty weekly chart has left the gap.
Nifty 50 Index Daily Chart
A long bull candle was formed on the daily chart on Friday, that has reached the important upper trajectory of the upper part of Tuesday's long bear candle at 23200 levels. Hence, the sharp fall of Tuesday (election result day) has been regained in just three sessions. This is a positive indication, so far. Till the Nifty maintains its upside above 23060 levels, it would be safe, but if started closing down below 23000, then it could bring short-term trend reversal or profit booking bouts, which could bring the index down to 22700 immediately.
Nifty 50 Weekly Fibonacci Chart Status
Before moving down, the index can go to new higher levels. Profit booking can bring down the index from 1.272 level to 0.5 levels.
Nifty 50 Index Weekly Chart -with Technical Indicators
RSI Indicator Pattern
The weekly RSI is 66.87; it shows a bearish divergence against the price. While the price has closed at a new high, the RSI has not. This has led to the emergence of the RSI’s bearish divergence.
Money Flow Indicator
This weekly indicator suggests bearish signals. Investors should wait for the index to come down before finalizing the decision to make their portfolio.
MACD Indicator Pattern with Bollinger Band
The weekly MACD stays bearish and below the signal line. A long-legged Doji is seen on Candles. Doji’s are more potent than spinning tops; their occurrence near the high point has the potential to disrupt any ongoing rally.
Bollinger band is suggesting that WeeklyCandles needs to come back inside the band, which is a bearish sign for upcoming activities.
FII's & DIIs Cash Weekly/Monthly Activities
Foreign portfolio investors (FPIs) have extended their selling streak in Indian markets and offloaded shares worth ₹14,794 crore in the first seven days of June. The total debt inflows stand at ₹4,008 crore so far this month. This comes after FPIs offloaded ₹25,586 crore worth of Indian equities in May.Â
Uncertainty over the outcome of the Lok Sabha elections 2024, high US bond yields, high Indian market valuations, and the outperformance of Chinese stocks weighed on sentiments. Foreign institutional investors (FIIs) remained net sellers last week, offloading ₹13,718 crore in the cash segment. Domestic institutional investors (DIIs) continued their buying spree with net purchases amounting to nearly ₹5,579 crore in the cash segment.
In the near term, the market is likely to be weighed down by huge FII selling, which has touched ₹24,960 crore cumulatively during the last three days. Largecaps in sectors like financials and IT, where FIIs have huge assets under management, may underperform.
This trend will change when FIIs turn into buyers, which is inevitable. Meanwhile, long-term investors can accumulate these high-quality large-caps where the margin of safety is high in an otherwise highly valued market.
There is excessive speculative activity in stocks where the floating stock is very low. Retail investors venturing into these speculative activities is highly risky.
Outlook for the NIFTY 50 Index for the Coming Week
The short-term trend of Nifty continues to be positive. Having reached overhead resistance of around 23300-23400 levels, there is a possibility of a minor dip in the market from the highs in the short term and that could be a buying opportunity. Immediate support is at 22900 levels
Moving to the second week of June, investors will keenly eye the ongoing Lok Sabha election developments, the upcoming US Fed interest rate decision, domestic and global macroeconomic indicators, foreign fund inflow, crude oil prices, and global cues.
The week will be critical from the domestic and technical point of view as investors will global indicators and the monetary policy.
Overall, we expect that election-related volatility is over, and Nifty 50 may now move towards 23,400-23,500 levels on the upside if the 23,000 level is not broken.
The pattern analysis of the weekly charts shows that the negative spike that the markets witnessed found support at the rising trendline of the channel that it had broken out from; and on the upside during the rebound, the Nifty has closed just below the upper rising trend line of the small channel that it has formed.
The lead indicators continue to show negative divergence and the breadth remains not as strong as it should be. All this continues to leave the markets vulnerable to profit-taking at higher levels.
India VIX:
The volatility swung violently. It surged over 40% at one point in time; by the end of the week, it came off by 31.38% to 16.88 as compared to its previous week’s close.
Support Level for the Coming Week for NIFTY:
The broader support level on the technical chart could be 22900, followed by 22630.
Resistance Level for the Coming Week for NIFTY:
The broader resistance level on the technical chart could be the level of 23400, followed by 23550 levels.
Important Upcoming Monthly/Weekly Activities
Domestic macroeconomic data
Domestically, India's economic calendar is also marked with key releases. On June 12, 2024, both India's industrial production data and inflation rate data will be unveiled. These figures are crucial indicators of the country's economic health and can likely influence market sentiment and policy decisions.
On June 14, 2024, India's balance of trade data will be released, providing insights into the nation's trade dynamics and external sector performance. This data is closely watched by investors and policymakers for its implications on currency movements, export-import trends, and overall economic stability.
US Fed Policy
The upcoming week will also place a significant focus on monetary policy decisions of central banks, as the US Federal Reserve will begin its two-day policy meeting on June 11. The US Fed will announce its interest rate decision after its two-day policy meeting on Wednesday, June 12, 2024.
It is to be noted that the US economic landscape has shown signs of moderation in recent months. The core personal consumption expenditures (PCE) inflation, a key measure watched by the US Fed, slowed to an annualized rate of 3.5 percent in April.
This decrease indicates that inflationary pressures are easing, which is a positive development for the economy. At the same time, the job market has shown signs of rebalancing. Payroll growth in April was 175,000, down from an average of 269,000 in the first quarter of the year.
Despite these developments, the US Fed remains cautious. Fed officials need more evidence of sustained progress in controlling inflation before they begin reducing the federal funds' target range. Market participants expect no rate changes at the upcoming June meeting, but there is potential for a rate cut in the fourth quarter of this year.Â
‘The post-meeting statement is anticipated to include updates to reflect lower run-off caps for Treasury securities and acknowledge recent data suggesting a reduced threat of price re-acceleration. Despite this, the statement will continue to describe inflation as "elevated," underscoring ongoing concerns.
.
The upcoming June policy decisions and subsequent data releases, particularly the May employment report, will be imperative in shaping the US central bank's monetary policy direction for the remainder of the year.
Global Cues
Major global events are scheduled for June 12, 2024. These include the announcement of US core and consumer price inflation figures, alongside the US Federal Reserve's interest rate decision and economic projections. These releases will likely notably impact Indian and global markets, particularly the monetary policy outlook and inflation expectations.
On June 14, 2024, the Bank of Japan will announce its interest rate decision. Despite flagging potential inflation risks, the Bank anticipates maintaining accommodative financial conditions, as outlined in its April policy meeting summary. This will be closely monitored for its implications on the Japanese economy and global market sentiment.
Apart from the above, the outlook for the market will be guided by the major global economic data this week, such as China CPI Inflation, UK GDP data, US PPI data. The movement of US bond yields and US dollar will be closely tracked by investors.
The US labor market added more jobs than expected in May, defying previous signs of a slowdown in the economy. The Bureau of Labor Statistics data showed the labor market added 272,000 non-farm payroll jobs in May, significantly more additions than the 180,000 expectations. This can lead to the US Federal Reserve not cutting the interest rate soon causing the market to fall and the US dollar to rise.
Crude Oil
International oil prices continued to extend losses and reported a third straight weekly loss as investors weighed the reassurances given by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) against the latest US jobs data which lowered expectations that the US Federal Reserve will cut interest rates soon.
Brent crude futures last settled 25 cents lower at $79.62 a barrel, while US West Texas Intermediate crude (WTI) dropped two cents to $75.53. Crude fell rates for a third straight week on demand concerns, with Brent down 2.5 percent and WTI off 1.9 percent. Back home, crude oil futures last settled 0.08 percent lower at ₹6,321 per barrel on the multi-commodity exchange (MCX).
Technical Analysis
Nifty is nearing its all-time high of 23,338, which acts as immediate resistance. A break above this level could propel the index towards 23,500 and even 23,800,
On the downside, the 23,000-22,800 zone offers immediate support, with the crucial 20-DMA around 22,600 acting as a stronger floor.
As we assess the near-term outlook, it appears probable that the index will continue to adhere to this range-bound behavior.
In Nifty, following the emergence of a bullish candlestick pattern on the daily timeframe, the index has maintained its upward trajectory.Â
‘We recommend maintaining a positive outlook unless the Nifty decisively breaks below 22,600, with an upside target in the 23,800-24,000 range.
Reading Current Option Data
Options data indicated that 24,000 is expected to be the key resistance area for the Nifty 50 in the coming week, with key support at 22500 levels.
On the weekly options front, the maximum Call open interest was seen at 23,500 strikes, followed by 24000 strikes, with maximum Call writing at 23,000 strikes, then 23,500 and 24,000 strikes. On the Put side, the 23,000 strikes saw the maximum open interest, followed by 22,800 and 22,700 strikes, with the maximum writing at 23000 strikes, then 228,00 and 22,500 strikes.
Participant Wise Final F&O Weekly Summary
FII's, PRO, and Clients F&O Summary by Segment
1). FII's positions as of the last trading day:
2). PRO's position as of the last trading day:
3). CLIENT's position as of the last trading day:
Summary - Overall
Overall, the Nifty has seen a strong rebound from lower levels post its extremely negative reaction to the general election outcome. This pullback may get extended a bit more but now the markets stare at some imminent prot-taking from higher levels.
The markets are also seeing defensive setups play out the defensive pockets like FMCG and Pharma have started to do well.
It is recommended to now use the moves to protect profits at higher levels. Leveraged exposures should be pared and fresh buying should be focused on defensive pockets and the stocks with improving relative strength.
A cautious outlook is advised for the coming week.
Thanks for reading.
Keep Trading
Stay Invested
Regards,
Neeraj Bhatia
(Managing Director)Â Â Â Â
Disclaimer: I am a National Stock Exchange-certified Technical Analyst and Chartist but not a SEBI-registered analyst, so consult your financial advisor before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.
Comentarios