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Nifty -Challenging Week Ahead; Weekly Range 23700-23900-24200-24500; Oscillators in All timeframe in the overbought territory;

Indian markets have been rallying since the election results. Both NIFTY50 and SENSEX have made substantial gains, surging over 7% so far this month. With the election results now settled, investors are turning their attention to other key factors that could influence the markets in the coming week.

On the weekly front, the market experienced a strong rally, reaching a new closing high, despite some profit-taking on June 28, the first day of the July series. Nifty surpassed the 24,000 mark, however, after a continuous rally, the index looks a bit heavy and might attract profit booking if Nifty sustains below 24,000.

The market recorded a strong rally during the week, reaching a new closing high, despite some profit-taking on June 28, the first day of the July series. If the Nifty 50 climbs above 24,200, then 24,500 is the level to watch. Until then, consolidation may continue with support at 23,800-23,700.

Post Market Weekly Analysis

The Nifty 50 weekly Index opened at 23382.30 touched the high level of 24174 and slipped down to 23350 before closing at 24010.60. So the benchmark index oscillated in a range of 824 points over the previous week's trading sessions, finally closing on a gain of 509.50 points, i.e. in percentage term (2.17%) on a week-on-week basis.

Nifty 50 Index Monthly Chart

A hanging man candle stick pattern on top of the lifetime high, suggested, that there is enough juice left to go up, if market sentiments support it. But because it is a monthly candle, which is completed just one day before. So we will see how the July season starts.

Nifty 50 Index Weekly Chart

On the weekly chart, the index formed a long bullish candle that engulfed the previous weekly candle and closed above the previous week's high, indicating a positive bias.

Nifty 50 Index Daily Chart

The last day of the trading session breaks the momentum of going upside from the previous 4 days in green and making higher highs. This was profit booking and it should be treated as expected because it is good for a bullish market.

Nifty 50 Weekly Fibonacci Chart Status

The six levels broke in a single candle, which is a very strong signal for the market. The next level for Fibonacci was 1.27 on the higher side and 0.236, on the lower side.

Nifty 50 Index Weekly Chart -with Technical Indicators

RSI Indicator Pattern

The weekly RSI stands at 72.38; it now remains mildly overbought. The RSI has marked a new 14-period high; however, it stays neutral and does not show any divergence against the price.

MACD Indicator Pattern

The weekly MACD is bullish and it stays above its signal line.

The pattern analysis of the weekly chart shows that the prices have closed

above the upper Bollinger band. This is generally regarded as bullish even if

there is a temporary retracement inside the band. However, looking at the

over-extended structure, there are higher chances of the price pulling

themselves back inside the band again.

FII's & DIIs Cash Weekly/Monthly Activities

Foreign institutional investors were net sellers on Friday, June 28, 2024, selling equities worth Rs 23.09 crore, while domestic institutional investors added equities worth Rs 6,658.31 crore, according to provisional data available on the NSE. However, FPI’s investment of Rs 26,565 crores in equity in June marks a reversal of their strategy of selling in the two preceding months.

Despite election-related concerns, foreign institutional investors (FIIs) purchased Indian stocks amounting to approximately ₹26,565 crore in June—before the Union Budget and India's inclusion in JP Morgan's bond index.

After being net sellers in the preceding two months, FIIs' reversal of stance coincides with expectations of ongoing reforms post-elections. Analysts attribute this shift to improved GDP growth forecasts and robust earnings reported by Indian companies, which have bolstered the attractiveness for FIIs.

FPI’s investment of ₹26565 crores in equity in June marks a reversal of their strategy of selling in the two preceding months. Political stability despite the BJP not getting a majority on its own, and the sharp rebound in markets aided by steady DII buying and aggressive retail buying, has forced the FPIs to turn buyers in India. It appears that FPIs have realized that selling in the most-performing market would be a wrong strategy. FPI buying can be sustained provided there is no sharp upmove in U.S. bond yields.

The debt inflows for 2024 so far stand at ₹68674 crores. In the long term, this will reduce the cost of borrowing for the government and reduce the cost of capital for corporations. This is positive for the economy and therefore for the equity market. The first fortnight data in June from the NSDL shows FPI buying in realty, telecom, and financials. FPIs were sellers in IT, metals, and oil and gas. The FPIs are likely to continue the buying trend in financials.

Foreign Investors Outlook

Political stability despite the BJP not getting a majority on its own, and the sharp rebound in markets aided by steady DII buying and aggressive retail buying, has forced the FPIs to turn buyers in India, and the FPIs have realized that selling in the most-performing market would be a wrong strategy. FPI buying can be sustained provided there is no sharp upmove in US bond yields.

India’s inclusion in the JP Morgan Bond Index is certainly positive. The debt inflows for 2024 so far stand at Rs 68,674 crore. "In the long term, this will reduce the cost of borrowing for the government and reduce the cost of capital for corporates. This is positive for the economy and therefore for the equity market,

The government's continuity following the election results guarantees ongoing reforms. This has led to an improved GDP growth forecast, attracting Foreign Portfolio Investment (FPI) buying. However, the FPI buying has been focused on a few specific stocks rather than being widespread across the market or sectors. This is because Indian equities are still considered overvalued by FPIs.

Outlook for the NIFTY 50 Index for the Coming Week

Nifty marked a new high of 24,174 but settled at 24,011, up 6.57% in June, capping off one of the best rallies in the Nifty. In the past week alone the Nifty rallied 2.17%, rising from a low of 23,350 to a high of 24,174.

Technically, Nifty is trading above its short-term moving average, with strong support at the Fibonacci retracement level of 23.6% at 23,500. The Nifty appears overextended, indicating some room for a short-term correction if it falls below 23,850.

It is also important to note that the markets have again run too hard and ahead

of themselves. The nearest MA, i.e., 20-week MA is currently placed at 22594

which is over 1400 points below the current close. The 50-week MA is placed at

21194 which is over 2800 points below the current close. This means that even if

there is the slightest mean reversion taking place, we may see the markets

coming off significantly from the current levels. If it does that, even then, it will

keep its primary uptrend intact.

India VIX:

The volatility surged a bit; India Vix inched higher by 4.72% to 13.80 on a weekly basis. The India VIX currently stands at 13.80, oscillating between the 13-15 range, suggesting a neutral outlook. However, a surge above the 15 level could induce panic among the bulls.

Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be 23900, followed by 23180-23750 levels.

Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be the level of 24200, followed by 24350 levels.

Important Upcoming Monthly/Weekly Activities

Global Cues

On the global front, the rise in US jobless claims and weak housing data have raised expectations of a rate cut in September. For the week ahead, the focus will be on the release of US & Indian manufacturing PMI data and the FED Chair’s speech. The undercurrent is positive, with no major risk visible for the domestic market in the short term. All eyes will be on the union budget proposals which will dictate the market in the medium term.

Crude Oil:

Early in Asian trading hours on Friday, oil prices climbed, marking a third consecutive weekly increase. Escalating geopolitical tensions and weather-related disruptions overshadowed indications of weak demand.

Brent crude futures for August, set to expire Friday, edged up 15 cents or 0.2% to reach $86.54 per barrel by 0020 GMT. Meanwhile, the September Brent contract also rose by 0.2%, reaching $85.44 per barrel.

U.S. West Texas Intermediate crude futures for August delivery increased by 24 cents or 0.3%, reaching $81.98 per barrel.

Despite signs of reduced demand from the United States, the largest oil consumer globally, oil prices continued their upward trend. This was attributed to escalating tensions between Israel and Hezbollah in Lebanon, which could potentially escalate into a broader conflict involving major oil-exporting countries like Iran in the Middle East.

Corporate Action

The coming week is packed with corporate activity as stocks of numerous companies will trade ex-dividend, ex-split, and ex-bonus. Several companies including Mahindra & Mahindra, Piramal Enterprises, and Tata Power, among others are trading ex-dividends in the coming week.

Technical Analysis

The chart pattern suggests that if Nifty crosses and sustains above the 24,200 level, it would witness buying, leading the index towards 24,500-24,600 levels. However, if the index breaks below the 23,900 level, it would witness selling, taking the index towards 23,800-23,600 levels. For the week, we expect Nifty to trade in the range of 24,600-23,600 with a positive bias. The daily and weekly strength indicator RSI (Relative Strength Index) is moving upwards and is quoting above its reference line, indicating a positive bias, but the caution is it is in the overbought zone

The Nifty has ended the June series with a significant gain of 7% amidst volatility. It turned out to be the best series in the current calendar year, fuelled by the BJP-led coalition forming the government for the 3rd consecutive term.

The Nifty rollover stands at 76%, higher than its last 3-series average of 69%. Cumulative future open interest stands at 15.1 million shares, the highest open interest observed on the day of inception in the last 2 years. The Bank Nifty rollover stands at 71%, lower than its last 3-series average of 76%. The series has started with a cumulative future open interest of 2.7 million shares as against its last 3-series average of 3 million shares.

The next target for Nifty is the 24,500 level with the 23500 zone maintained as the support as of now. “The Nifty witnessed a robust move during the week with four consecutive sessions of strong positive candle formation to scale 24000 for the first time and is anticipated for further rise in the coming days with bias and sentiment maintained strong.

Reading Current Option Data

Let's examine the Nifty option chain for the upcoming week. The highest open interest (OI) in out-of-the-money Call options is at the 24,500 strikes, with notable open positions also present at the 24,200 strikes, indicating a resistance zone. Conversely, there is not a significant amount of open interest on the out-of-the-money Put side; instead, relatively high positions are seen at the at-the-money (ATM) 24,000 strike for Put. The long-short ratio of foreign institutional investors (FIIs) has now reached an overbought zone, suggesting that a short-term cooldown is likely.

The weekly options data indicated that the Nifty 50 is likely to face initial resistance at 24300 and then 24,500, while 24,000 and 23500 now is likely to be the key support area.

On the Call side, the maximum open interest was seen at the 24100 strikes, followed by the 24,200 and 24300 strikes, with maximum writing at the 24,500 strikes, then the 24,100 and 24,300 strikes.

On the Put side, the maximum open interest was observed at the 24,000 strikes, followed by the 23,500 strikes, with the maximum writing at the 24,500 strikes, followed by the 23,800 and 23,500 strikes. support.

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

From a technical perspective, the markets are showing initial signs of an impending consolidation from higher levels. Despite the trending move through the week, Nifty has created strong resistance in the 24000—24200 zone as evidenced by the derivatives data. All through the week, the index has seen strong Call OI addition in the strikes falling in this range. On the monthly charts, a candle with a long lower shadow has emerged which holds the potential of temporarily stalling the current upmove. The Nifty now stands mildly overbought on weekly and monthly charts. Going by the technical structure, even if the markets mark incremental highs, they are now heavily prone to some measured corrective moves from the current or higher levels.

While the market appears to be in a strong bull run, the next move in the coming week might be challenging as oscillators across all major time frames are in overbought territory. Often, overbought conditions indicate potential inherent signs; however, in the near term, a cool-down cannot be ruled out. While taking contra-bets and shorting the market is not advised, taking some profits is prudent, as a correction, either in price or time, is anticipated. This correction should be seen as healthy for the ongoing bull run. Given the market's vertical rise into uncharted territory, pinpointing key trading levels is challenging. However, 24,200 to 24,250 is expected to act as immediate resistance, while 23,850 followed by 23,650 may serve as crucial support levels.

Overall, it is strongly recommended that even if we see the markets attempting to inch higher, one must focus on guarding profits at higher levels rather than giving a blind chase to the up move. It would be important to rotate the stocks and sectors effectively so that one stays invested in relatively stronger stocks.

The pockets like IT and FMCG are also seen improving their relative momentum and are expected to do well. By and large, while keeping the leveraged exposures at modest levels.

it is recommended to approach the markets with a cautious approach over the coming week.

Thanks for reading.

Keep Trading

Stay Invested


Neeraj Bhatia

(Managing Director)    

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.

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