Nifty -Weekly Expiry on Interim Budget Day; Either side volatile trend most likely

Interim Budget 2024: Finance Minister Nirmala Sitharaman will present the Interim Budget for the financial year 2024-2025 (FY25) on February 1.

Since the upcoming Budget 2024 will be a Vote on Account rather than a full Budget ahead of the General Elections this year, the government may not make major announcements on Budget Day. However, the government's focus is expected to remain on reducing the deficit, boosting manufacturing, and investing in infrastructure. If the Budget brings in a lot of rise in capex, rail, and defence spending, we may see indices rising mildly during the event.

Post Market Weekly Analysis

The Nifty 50 weekly Index opened at 21716.70 touched the high level of 21750.25 and slipped down to 21137.20 before closing at 21352.60. So the benchmark index oscillated in a range of 613.05 points over the previous week's trading sessions, finally closing with a loss of -219.20 points, i.e. in percentage term (-1.02%) on a week-on-week basis.

Nifty 50 Index Monthly Chart

Month end is expected to close with a red candle, but two major points need to be noted. First, the volume of this month is approximately the same as the previous month, but the red color shows, that this month we were more on the sell side, instead of the buy side. The second point is the charts have started showing rejection from the highest point, although they are not so weak. even after a strong selling by FIIs in the whole month of -35778 Crore, but we need to be cautious going forward.

Nifty 50 Index Weekly Chart

On the weekly chart, we can see that the long-to-medium-term channel is squeezing regularly, so going forward, it is possible, that only one bad news or news against expectations can break the channel most probably on mostly on lower side only. If we look at the volume side, from the last two weeks the selling side has been increasing, which indicates to start saving your profit with trailing stop-loss.

Nifty 50 Index Weekly Chart

The 9-Week-Simple Moving Average has already been broken, and the index has closed below that level. As well as from the last two weeks, the market has been rejected from its all-time high. This is a sign of profit booking by big investors. Smart money is getting out of the market, so we need to be cautious and expect a lot of volatility in the coming days.

Nifty 50 Index Daily Chart

The index has closed below the 9-day Simple Moving Average and the 20-day Simple Moving Average with huge volumes. Within the previous 7 trading sessions. the volumes are high whenever ever the candle is in Red. This indicates we need to start profit booking and the upside is very limited from here. Now we can try to touch 50 or 100, days SMA very soon.

Nifty 50 Weekly Fibonacci Chart Status

From the last two weeks, rejection from the high is very clear, and the second follow-up weekly candle has confirmed that more downside is in the pipeline. It seems that we can touch the level of 0.618, 0.05, and then 0.382 level very soon in the coming days.

Nifty 50 Index Weekly Chart -with Technical Indicators

RSI Indicator Pattern

The weekly RSI stands at 65.81; it has crossed below 70 from the overbought area which is bearish. It stays neutral and does not show any divergence against the price.

MoneyFlow Indicator

This weekly indicator is at 76.12, which already comes down again from its overbought zone but still, it seems in the overbought zone. It is not a good time for investors to pitch in, they can wait further. Traders can expect bearishness.

MACD Indicator Pattern

The weekly MACD stays bullish and above its signal line.

FII's & DIIs Cash Monthly Activities

In January so far, the FIIs sold equities worth Rs 35,778.08 crore, and DIIs purchased equities worth Rs 19,976.66 crore.

During the week, FIIs sold equities worth Rs 12,194.38 crore, while Domestic institutional investors (DIIs) provided some support as they bought equities worth Rs 9,701.96 crore.

Since the tug-of-war between the FIIs and DIIs continues, volatility will remain high in the near term. The rising bond yields in the US are a matter of concern. From 3.8 percent, the US 10-year yield is back at 4.18 percent which indicates that the Fed rate cut will come only in the second half of 2024

Previous Week's FII positions in Options & futures and Cash Segment

Outlook for the NIFTY 50 Index for the Coming Week

As we step into the new week, the markets will face one of the most important external domestic events, i.e., the Union Budget slated to be presented on the 1st of February. However, it is important to understand and note that due to General Elections scheduled later this year, the Government will not present a full-edged Union Budget but a “Vote-on-Account”.

Once the elections are done away with, the Government usually comes up again with a full budget. Despite this technicality, the markets will continue to react in a very volatile way. The volatility will be even more as the 1st falls on Thursday which is also a weekly options expiry day for Nifty. Overall, going by the F&O data, the markets have dragged their resistance levels lower to 21700; so long as the Nifty is below this point, no runaway rallies are expected.

Further to this, there are strong possibilities that the markets remain choppy throughout this week; a sharp directional bias is expected to emerge second half of Thursday's trading session, once the external event of Vote-on-Account is out of the way.

India VIX:

The previous week India VIX closed at 13.86. it touched a high of 15.64 and a low level of 12.19, It gained on a closing basis by +0.06250 (0.45%) on a week-on-week basis.

The volatility has been increasing for a third consecutive week, while during intraday, it reached near 200-week EMA (i.e. around 16), which is crucial to watch going ahead. India VIX, the fear index, rose 0.45 percent to 13.86 level during the week, while in the last three weeks, it gained nearly 10 percent.

Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be in the range of 21100 followed by 20950 levels.

Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be 21500, followed by 21750 levels.

Important Upcoming Weekly Activities

Interim Budget

Finance Minister Nirmala Sitharaman will announce the interim budget on February 1. The FM is anticipated to announce a series of measures aimed at boosting consumption, implementing reform policies for a fair playing field among manufacturers, strategically allocating funds for infrastructure development, and focusing on agriculture.

The finance ministry may assume a nominal GDP growth of 10.5 percent for 2024-25 in its interim budget calculations. The Street will also be eyeing a significant boost to capex spending from Rs 10 lakh crore announced last time.

FOMC decision

The next Federal Open Market Committee (FOMC) meeting will be held on January 30-31. During the most recent FOMC meeting held on December 12-13, 2023, interest rates were kept unchanged at 5.25-5.50 percent. The Fed, however, did signal at least three rate cuts could be in the cards for 2024 as inflationary pressures come down.

Federal Open Market Committee can expect to opt to maintain key interest rates at current levels. The Street will be keenly watching for Fed chair Jerome Powell's commentary as recent US GDP numbers exceeded estimates

January Auto Sales

Markets will pay attention to the auto sales numbers, which will be out from February 1 onwards. Passenger Vehicle sales had increased 4.4 percent YoY in December 2023. Maruti Suzuki India, the country's largest carmaker recorded a dip in its sales figures in December 2023 compared with the same month in 2022. Hero Motocorp's total sales also fell 0.06 percent YoY in December.

Technical Analysis

After showing a steep weakness on Tuesday, Nifty shifted into a sustainable upside bounce amidst volatility on Wednesday and closed the day higher by 215 points. Sharp intraday buying has propelled the market to move up in the later part and Nifty closed near the highs. A long positive candle was formed on the daily chart after opening lower, which indicates the formation of a bullish Piercing line-type candle pattern.

Formation of such patterns after a reasonable weakness calls for caution for shorts. The negative chart pattern like lower tops and bottoms is intact and the Nifty is currently moving up towards the formation of a new lower top of the sequence (which is yet to be formed at the highs). Nifty is currently placed at the hurdle of mid part of Tuesday’s long bear candle at 21500 levels.

The short-term trend of Nifty seems to have reversed, but the uncertainty remains in the market at the highs. The market could encounter strong overhead resistance around 21500-21600 levels in the coming sessions. Immediate support is at 21220 levels.

Reading Current Option Data

As per the options data, 21300 seems to be the critical area to watch for the trend on either side in the coming week and 21400 is expected to be an immediate hurdle for the Nifty 50, while 21200 and 21000 may act as support zo

nes.

The 21300 strikes owned the maximum Call open interest, followed by the 21400 strikes and 22000 strikes, with meaningful Call writing at the 21300 strikes, then the 21400 strikes,

On the Put side, the maximum open interest was visible at the 21300 strikes, followed by the 21000 strikes, and 21200 strikes, with writing at 21300 strikes.

Participant Wise Final F&O Weekly Summary

FII's, PRO, and Clients F&O Summary by Segment

FII's positions as of the last trading day:

PRO's positions as of the last trading day:

CLIENT's position as of the last trading day:

Summary - Overall

The sentiment may continue to lean towards the bears as the Nifty struggled to surpass the 21500 mark, where call writers held substantial positions. Looking ahead, the trend is likely to remain sideways, fluctuating within the range of 21300 and 21500. Nevertheless, a decisive breakthrough above 21500 could propel the index towards 21700-22000 in the short term.

On the daily charts, we can observe that the counter-trend rally faced resistance in the zone of 21520 – 21550. On the downside, the 21240 – 21220 zone acted as a support zone where the 40-day moving average is placed. Thus, Nifty is consolidating within these two parameters. A breach of this range shall lead to a move in that direction.

The hourly momentum indicator has a positive crossover, which is a buy signal and hence there can be a minor degree bounce up to 21520 – 21550 before it resumes the next leg of the fall.

On the technical front, with the immediate resistance being at the 21400 mark, we expect the market to go down further towards 21100 and 21000 eventually. If it breaks the 21000 level we can witness more selling pressure up to 20900-20500 levels. Any trend change would happen only once Nifty surpasses the 21500 mark

On the economic data front, the fiscal deficit numbers and infrastructure output data for December will be released on January 31, while HSBC Manufacturing PMI data for January will be announced on February 1. Foreign exchange reserves for the week ended January 26 will be released on February 2.

Over the coming days, it is strongly recommended to avoid highly leveraged exposures in the markets as the volatility is expected to spike as we go near the event day. This may cause sharp moves by the markets on either side; the stop losses on either side are likely to get triggered frequently.

It is strongly recommended to adopt a highly selective approach to the markets. While staying very stock-specific while making new purchases, the exposures should also be kept at modest levels.

Thanks for reading.

Keep Trading

Stay Invested

Regards,

Neeraj Bhatia

(Managing Director)    

https://www.crbpvl.com/

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.