Weekly Trend Report
- 04th October 2024
Week Gone By
The key equity indices ended the truncated week with significant losses amid heightened tensions in the Middle East, triggered by the Israel-Iran conflict. India’s fiscal deficit improved to 27% of the full-year target for April-August, down from 36% in FY24, while the HSBC Manufacturing PMI fell to 56.5 in September. Tata Motors reported an 11.52% sales decline, contrasting with Bajaj Auto’s 19.60% increase. In broader economic news, the British economy grew 0.5% in Q2, Germany’s inflation rate fell to 1.5%, China’s central bank plans to cut mortgage rates, and the US added 143,000 jobs in September, reflecting resilience in the job market.
Week Ahead
FPIs are reallocating funds from India, viewed as expensive, to Hong Kong amid optimism for a Chinese economic rebound. Market dynamics will hinge on rupee-dollar fluctuations, crude oil prices, and domestic institutional investor (DII) activity. The Reserve Bank of India’s Monetary Policy Committee will meet from October 7-9, with outcomes announced on October 9, while industrial production data for August will be released on October 11. Globally, the US will publish key inflation and consumer sentiment data on October 10 and 11, following a recent rate cut by the Federal Reserve.
Technical Overview
- Amidst geopolitical tensions in the Middle East, SEBI’s announcement of changes in the derivatives trading landscape, and significant FII selloffs, the market faced strong corrective pressure, ending the week on a weak note.
- The Nifty 50 remained under selling pressure throughout the week, showing no intention of a technical pullback. The market experienced persistent weakness in all four trading sessions, with a widening trading range of 1167 points over four days.
- Additionally, volatility surged, with the India VIX rising by 18.10% to 14.13 on a week-on-week basis.
- The benchmark Nifty 50 closed with a substantial weekly decline of 1164.35 points (-4.45%).
- The week concluded with broader and sectorial indices trending downward, indicating deteriorating momentum and worsening market breadth.
- A significant number of stocks traded below their respective 10 and 20-day moving average, nearing oversold territory, while those above their 50-day moving average also fell below the median threshold.
- Stocks trading above their 200-day moving average dipped below the 70 levels, signaling early signs of market weakness, although further confirmation is necessary.
- The market breadth shifted to highly pessimistic momentum, reflecting diminishing stock participation.
- On the technical front, the price action is currently trading slightly below the 50-day moving average, considered institutional support. Reclaiming the average line, currently trading near 25033, on a weekly closing basis in the coming week is crucial; otherwise, selling pressure may persist.
- A follow-through on the upside in the coming week is essential.
- Derivatives data suggest that the market may seek support at 25,000 levels, which hold the highest PUT OI and minimal Call OI, making it a psychologically important level.
- A stable start to the week is expected, with major resistance levels at 25430 and 25790, and major supports anticipated at 24780 and 24600.
- Currently, most broader and sectorial indices are experiencing an early downswing. As a result, overall swing confidence remains low, indicating that portfolios should refrain from taking any open risk.
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