The US Fed cut its benchmark lending rate by 25 bps to 4.5%, in line with expectations and in an attempt to support economic growth, China’s National People’s Congress (NPC) approved $839 billion refinancing of local government debt. This would help reduce interest payments by 600 billion yuan over five years.
FIIs have been selling equities for the last 29 consecutive days amounting to Rs 1.41 lakh crore, denting investor sentiments. Markets are currency trading on the back of mixed global factors and subdued quarterly results.
Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ET Markets regarding the outlook on the markets. Following are the edited excerpts from his chat:
Nifty seems to be near its support currently. Do you foresee some betterment in the macroeconomic factors that may help the index bounce back?
This week, the benchmark index Nifty found support near its previous swing low zone of 23,800–23,900, sparking a rebound as traders reacted positively to Donald Trump’s presidential victory. However, despite the recovery, the index struggled to break above its 20-day EMA zone of 24,500-24,550, encountering renewed selling pressure on Thursday and Friday.
This price action led to the formation of a high wave candle on the weekly chart, signalling clear indecisiveness among market participants and suggesting that traders are uncertain about the market’s next direction. The momentum indicators also portray a similar picture. The daily RSI is oscillating in a narrow range for the last five trading sessions. Further, the trend strength indicator, ADX, has remained flat over the last four sessions.
These technical factors suggest that the market is likely to experience consolidation over the next few trading sessions. Talking about the crucial levels, the zone of 23,850-23,800 will act as immediate support for the index. If the index slips below the level of 23,800, then the 200-day EMA will act as the next important support for the index, which is currently placed at the 23,532 level.
While, on the upside, the zone of 24,500-24,550 will act as a crucial hurdle for the index. Any sustainable move above the level of 24,550 will lead to a sharp upside rally in the index up to the level of 24,900 in the short term.
How do you see Trump’s victory impacting the Indian markets now?
Trump’s protectionist policies may accelerate China plus one strategy, resulting in gains for export-based sectors such as pharma, IT, and chemicals. Moreover, a strong US economy under Trump could reverse the heavy outflows from FIIs/FPIs as confidence returns to the market.
What is your take on the future Fed rate cuts and its impact on the global as well as Indian markets?
The Fed recently lowered rates in line with its commentary during its previous FOMC meet. The financial markets are expecting four additional cuts of 25 bps each through 2025. This could gradually be beneficial for the emerging equity markets in the medium term.
Given a general downward trend in the market, which sector seems well-placed right now?
We feel Nifty IT is witnessing an outperformance, and this could witness further strength in the coming few sessions.
After marking a high of 43,645 on September 17, Nifty IT entered a throwback phase. During the period of throwback, the index has taken support near its 100-day EMA level and resumed its northward journey. Interestingly, on a weekly scale, it has formed a Bullish Engulfing candlestick pattern, which is a bullish sign.
Most noteworthy, on a ratio chart of the index as compared to Nifty has given a consolidation breakout. This clearly indicates strong outperformance as compared to frontline indices. Further, it is also trading above its short and long-term moving averages. Hence, we believe the index is likely to continue its northward journey in the next couple of trading sessions.
Talking about level, the zone of 41,200-41,100 will act as an immediate support for the index. While, on the upside, any sustainable move above the level of 42600 will lead to a sharp upside rally up to the level of 43,500, followed by 44,300 in the short term.
Is it even a trader’s market right now? Or do you think one should wait and watch?
Right now, it’s more of a stock-specific trader’s market than a broad-based rally. While the broader market is uncertain, selective opportunities in specific stocks remain. With the help of relative strength analysis, traders can navigate in this market.
What are the key factors/ events that one should be cautious of?
Upcoming State Elections and announcements by US President Trump on certain key policy matters will be keenly watched by market participants and have the potential to create market volatility in the near term.
Any stocks that are technically well placed?
Technically, Indian Hotel, Larsen & Toubro, Mahindra & Mahindra and Coforge look good.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)