Indian benchmark indices are to kick off the week with a strong note and open sharply higher on Monday as India and Pakistan agreed for a de-escalation of tension at the border. The focus of the traders shall now shift towards the last leg of quarterly earnings, trade deal agreement and macroeconomic factors.
Nifty futures on the NSE International Exchange traded 525 points, or 2.20 per cent, higher at 24,590.50, hinting at a positive start for the domestic market on Monday. Asian stocks strengthened in the early trade. Nikkei, KOSPI, ASX 200 and Hang Seng added one-third to half-a-per cent in the early trade.
Global diplomatic efforts are likely to bring stability in the coming days, said Vaibhav Porwal, Co-Founder at Dezerv. “Investors should zoom out and look at the markets from a broader perspective. Indian equity markets stand on strong fundamentals and we don’t have much to worry about. Well-diversified portfolios will weather this storm,” he said.
Wall Street stock futures climbed as China and the US made ‘substantial progress’ on their trade talks. On Friday, the Dow Jones Industrial Average fell 119.07 points, or 0.29 per cent, to 41,249.38, the S&P 500 shed 4.03 points, or 0.07 per cent, to 5,659.91 and the Nasdaq Composite rose 0.78 points, to 17,928.92.
The US dollar firmed against safe haven peers on Monday as signs of progress in US-China trade talks boosted hopes. The dollar index edged up 0.2 per cent to 100.60. The general increase in risk appetite hurt gold. The yellow metal was off 1.7 per cent at $3,268 an ounce , short of the April all-time peak of $3,500..
Oil prices went the other way on hopes progress in trade talks would lessen the risk of a major economic downturn, though plans for increased supply by OPEC+ remain a headwind. Brent rose 23 cents to $64.14 a barrel, while US crude added 25 cents to $61.27 per barrel.
Investors will continue to focus on the ongoing Q4 earnings season, with major companies like Tata Steel, Tata Motors, Bharti Airtel, and Hindustan Aeronautics scheduled to announce results, said Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services. Key macroeconomic indicators such as India’s CPI and US industrial production data will be closely tracked.”
Foreign investors continue to show confidence in the Indian market, infusing Rs 14,167 crore so far this month. Provisional data available with NSE suggest that FPIs turned net sellers of domestic stocks to the tune of Rs 3,798.71 crore on Friday. On the other hand, domestic institutional investors (DIIs) turned net sellers of Indian equities to the tune of Rs 7,277.74 crore.
As a ceasefire has been declared, FIIs are likely to resume their equity purchases in India, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “Global macros (weak dollar, slowing US and Chinese economy) and domestic macros (high GDP growth and declining inflation and interest rates) will facilitate increasing FII inflows into Indian equity, going forward,” he added.
Nifty outlook
Nifty broke below its recent consolidation zone but managed to hold above the 21-DEMA, which currently acts as immediate support. According to the Fibonacci extension, a key target for Nifty is at 23,850, said Choice Broking. “If the index fails to hold this level, the next potential support lies near 23,490. A decisive close below 24,000 could accelerate the downside momentum in the short term,” it said.
Amol Athawale, VP- Technical Research at Kotak Securities believes that as long as the market remains below the 24,150/79,900 level, weak sentiment is likely to continue. On the downside, it could retest the 23,800/78,800 level. Further downward movement may continue, potentially dragging the market to 23,600/78,200.
Nifty Bank outlook
The index has slipped below both the 9-day and 20-day EMAs. On the daily chart, the index appears to be forming a flag pattern, while the undertone remains cautious, the pattern has not confirmed a breakdown, said Om Mehra, Technical Research Analyst at SAMCO Securities. “The momentum is probably going to stay skewed to the downside unless the index recovers the 55,000 mark,” he said.
Bank Nifty formed a doji candle with a long upper shadow signaling continuation of the corrective decline, said Bajaj Broking. “We expect it to extend the consolidation in the range of 53,000-56,000. On the downside, key support is seen between 53,000-53,500 levels being the previous major breakout area and previous gap up area,” it said.
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