Weekly Trend Report
- 09th November 2024
Week Gone By
The markets had a mixed week, ending lower despite some global optimism following the US Federal Reserve’s 0.25% interest rate cut. The Nifty fell by 156.15 points to 24,148.20, and the Sensex dropped by 237.8 points to 79,486.32. In India, exports of services grew by 14.6% YoY to $32.6 billion, while imports rose by 13.2% to $16.5 billion. The HSBC Composite Output Index also improved to 59.1 in October, better than expected. Globally, the US economy added just 12,000 jobs in October, much fewer than anticipated. Following this, the Fed cut rates by 0.25%. In Europe, the Bank of England reduced interest rates to 4.75%, its second cut since 2020, due to high inflation and slower growth.
Week Ahead
Next week, investor sentiment will be shaped by a combination of domestic and global factors, with particular attention on the final batch of second-quarter results (Q2FY25) from Indian companies, which are expected to offer valuable insights into corporate performance. India’s Consumer Price Index (CPI) and Wholesale Price Index (WPI) will be released on November 12 and November 14, respectively, while balance of trade data will be published on November 15. On the global front, US inflation data will be released on November 13, followed by a speech from US Federal Reserve Chair Jerome Powell on November 15. Additionally, Japan’s GDP growth rate, as well as China’s industrial production and retail sales data, will also be released on November 15.
Technical Overview
- The markets have been navigating a cautious path over the past week, reflecting a lingering sense of uncertainty.
- The Nifty index digested the fallout from the US election results, with two days of robust technical rebounds quickly met with selling pressure, leaving the index oscillating within a broad range. In fact, it navigated a substantial 721-point swing throughout the week.
- As volatility eased, the India VIX dipped by 6.95%, settling at 14.47.
- However, despite a week characterized by range-bound trading filled with uncertainty, the headline index wrapped up with a net loss of 156 points. Most broader indices are feeling the pressure, finding their uptrends under threat, while sectorial indices have firmly entered a downtrend. On a brighter note, there has been a noticeable improvement in momentum, a positive development.
- On the market breadth front, while the percentage of stocks trading above 10 and 20 DMA remains below their median, those above 10 DMA have begun to outnumber those above 20 DMA. This suggests a potential shift in intermediate trends and momentum.
- Stocks that are above their 50 DMA are still lagging, but those above 200 DMA are inching lower to the median levels and a drop below 50% here could intensify the bearish sentiment.
- Wednesday was a standout day for the momentum market breadth, rekindling hopes for a potential rally. Yet, the week concluded with the second-lowest momentum level seen in the last 10 trading sessions.
- Technically, the Nifty has not fully escaped the challenges it faces; it has dipped below its 20-week moving average, currently sitting at 24775. A cluster of resistance levels lies ahead, with the 100 DMA at 24709 and a short-term 20-day MA at 24486.
- This creates a formidable 250-point resistance zone around the 24500-24750 levels, meaning any technical rebounds may struggle once the index approaches this area, making it of cardinal importance to decisively reclaim this zone on a closing basis to attract bullish momentum.
- On the flip side, the 23900-23800 zone holds immediate support. Should that be breached, the markets could succumb to greater weakness. As we look ahead, it’s clear we are in for a turbulent ride, with higher volatility and erratic swings expected. Given the current landscape, staying in cash appears to be a wise strategy, as swing confidence remains at zero and the broader market cautions against taking open risks with portfolios right now.
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