Is the Nifty at a Tipping Point? Indices Decline as the Nifty Struggles to Stay Afloat—Can it Overcome the Downtrend?

At the close, the Nifty 50 was at 24,971.30 down by 0.34%

In a day marked by uncertainty, the NSE Nifty 50 opened in the red, declining 0.34% and closing below the critical 25,000 mark. The index settled at 24,971.30, forming a small negative candle on the daily chart, which, with its minor upper shadow, reflects the ongoing range-bound action in the market. Currently hovering near the 24,900 levels, traders are on edge, watching closely for any signs of further declines.

Market Dynamics: A Struggle Against Selling Pressure

Wednesday’s decline was largely attributed to selling pressure in the auto and IT sectors, compounded by persistent foreign fund outflows and lackluster global market trends. Investors remain wary, grappling with fears of a potential downgrade in FY25 earnings, which threatens the sustainability of premium valuations.

Despite some initial recovery, selling in key sectors pushed the Nifty down to the lower range near 24,900 intraday. For the second consecutive session, benchmark indices ended lower, highlighting the bearish sentiment. As noted by market analysts, the Nifty has been stuck in a 24900 – 25200 trading range for the past six sessions.

Key Technical Levels: The 24,900 Threshold

Technically, the Nifty has not only breached the 50-day EMA (Exponential Moving Average) of 25,045 but has also fallen below the upward-sloping support trendline. Although it managed to defend the 24,900 level, experts suggest that this threshold could serve as immediate support. A break below this level could intensify weakness, potentially dragging the Nifty down to 24,700.

Market sentiment remains bearish, driven by profit-taking, particularly in banking, auto, and IT stocks. Global cues are weak, adding to the overall market anxiety, with persistent selling from foreign investors keeping local traders on high alert.

Indecision in the Market

The Nifty’s performance reflects indecisiveness, forming a DOJI candle on its daily chart—a sign of market hesitation. As the day progressed, it became clear that upward movements are facing resistance from ongoing selling pressures and a tepid start to the earnings season. However, strength in select heavyweight stocks has somewhat moderated the decline.

Global Impact: Pullback in Markets

On the global front, Asian and European markets have also traded lower, reflecting a pullback in U.S. stocks from their recent highs, particularly in technology and energy sectors. This global weakness only adds to the challenges faced by the Nifty.

The Bigger Picture: Investor Sentiment and Foreign Flows

Investor sentiment is clouded by fears of downgraded earnings forecasts, with expectations for slow earnings expansion in Q2FY25 due to weak demand and volatility in input prices. In a concerning trend, foreign portfolio investors (FPIs) have pulled nearly $8 billion from Indian equities in October alone, marking one of the largest outflows since March 2020.

In a related note, the Securities and Exchange Board of India (Sebi) has introduced measures allowing FPIs to access sale proceeds on a T+1 basis, potentially enhancing market liquidity. Yet, the Bank of America survey indicates that global fund managers are shifting their allocations from India to China following a recent stimulus package from the Chinese government aimed at reviving its economy.

With all these factors at play, the question remains: Will the Nifty find strength at the 24,900 support, or is a deeper decline on the horizon?

Bank Nifty: Down by 0.20%

The Bank Nifty started the day in negative territory, dipping by 0.20% and ultimately closing at 51,801.05. This downward trend mirrored the broader market sentiment as the BSE Sensex also succumbed to selling pressures, finishing down 0.39% at a low of 81,501.36.

In the sectorial front, the Realty sector surged by 0.55%, leading to speculation about what could come next. But the real story lies in Mahindra Lifespace Developers Ltd., which skyrocketed by 2.70%, and Godrej Properties Ltd., which wasn’t far behind with a 2.55% gain.

Meanwhile, in a shocking twist, the Auto sector took a nosedive, becoming the day’s top loser with a fall of 1.27%. What happened here? Mahindra & Mahindra Ltd. tumbled by a staggering -2.78%, while TVS Motor Company Ltd. followed closely, losing -2.37%.

Foreign Institutional Investors (FIIs) recorded a net outflow of Rs. 3,435.94 crore, with a buy value of Rs. 14,465.64 crore and a sale value of Rs. 17,901.58 crore.

Domestic Institutional Investors (DIIs) exhibited a contrasting trend, posting a net inflow of Rs. 2,256.29 crore. Their buy value stood at Rs. 13,432.45 crore, while their sale value was lower at Rs. 11,176.16 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included HDFC Bank with a 0.97% increase, AU Bank with a 0.17% increase, State Bank of India with a 0.16% increase, Punjab National Bank with a 0.10% increase, and Canara Bank with a 0.02% increase.

On the other hand, the biggest losers in the sector included Federal Bank with a 2.12% decline, Kotak Bank with a 1.33% decline, IndusInd Bank with a 1.09% decline, ICICI Bank with a 0.84% decline, and IDFC First Bank with a 0.69% decline. These results suggest that some of the banking stocks performed better for the day.

Gold and Silver Rate (INR) 16th October, 2024

Rupee in a Tug-of-War: Will It Hold Steady or Break Free?

In early trade, the rupee slipped by 3 paise, settling at Rs. 84.07 against the US dollar. But don’t be fooled by this narrow movement—the forces at play are anything but calm. The strength of the American dollar combined with heavy foreign fund outflows is dragging the rupee down, hinting at deeper market uncertainties.

But the rupee’s journey isn’t over yet. While it is expected to remain in a narrow trading range, weak crude oil prices and potential RBI intervention could lend some support to the local currency, creating a delicate balance.

On the interbank exchange, the rupee opened at Rs. 84.03 and quickly touched Rs. 84.07, a minor dip compared to its Tuesday close of Rs. 84.04, when it had appreciated by 1 paisa.

Adding to the tension, the dollar index—a measure of the greenback’s strength—sits at 103.19, just slightly below a recent two-month high of 103.25. The surge comes on the back of profit-booking by FIIs, who are now pulling back after flooding Indian equities with USD 25 billion in inflows, leaving stocks feeling overvalued.

And then there’s oil—globally, prices have dropped 5% on weaker demand forecasts and easing fears of supply disruptions from the Israel-Iran conflict. But despite this, Brent crude ticked up by 0.26% to USD 74.44 per barrel, adding another layer of uncertainty.

Will the rupee find support and hold the line, or is further depreciation lurking just around the corner?

Stocks Highlights

HDFC Life Insurance Company Ltd. saw its share price move up by 1.79%, from Rs. 714.25 to Rs. 727.00 in the latest trading session. This upward trend reflects growing investor confidence in the company’s strong financial performance. HDFC Life’s annual revenue growth of 42.38% over the past year has far exceeded its 3-year compounded annual growth rate (CAGR) of 12.22%. However, a note of caution: a sell signal appeared with a 20-day moving average crossover, a pattern that has historically led to an average price decline of -2.25% within seven days, over the past five years.

Despite short-term technical signals suggesting a dip, the company’s long-term fundamentals remain robust. When comparing stock returns over the last three years, HDFC Life delivered a modest 2.95%, falling behind Nifty 100’s impressive 40.51% return.

Trent Ltd. faced a tough trading day, with its share price dropping by -3.61% from Rs. 8,124.25 to Rs. 7,830.90. Interestingly, in the last 19 years, only 1.77% of trading sessions saw an intraday decline of over 5%, highlighting the rarity of such large swings.

Despite the recent dip, Trent Ltd. remains an outperformer in the long term. Its return on equity (ROE) of 36.55% for the year ending March 31, 2024, outpaced its 5-year average of 14.67%. Moreover, the company delivered an astonishing 603.73% return over three years, dwarfing Nifty 100’s 40.51%.

Advance Decline Ratio

Today, the advance-decline ratio was 0.99, and the market breadth was negative. The volatility index India Vix increased by 0.63 to settle at 13.09 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 1378
Decliners – 1390
52Wk High – 104
52Wk Low – 21
High Band Hitters – 117
Low Band Hitters – 50
200d SMA – 23275
50d SMA – 25079
20d SMA – 25432

Top Gainers and Losers Stocks

The top gainers were HDFC Life (+1.79%), Dr. Reddy (+1.34%), Grasim (+1.05%), HDFC Bank (+0.97%), and Bajaj Auto (+0.88%).

The top losers were Trent (-3.61%), M&M (-2.78%), Infosys (-2.10%), Hero MotoCorp (-2.10%), and Adani Ports (-1.39%).

Top Gainers and Losers Sectors

The top gainers sector were Realty (+0.55%), Oil & Gas (+0.23%), Financial Services (+0.08%).

The top losers sector were Auto (-1.27%), IT (-1.17%), Media (-0.48%), Pharma (-0.38%), and FMCG (-0.37%), .

SECTORS – NOTABLE ACTION
REALTY +0.55%
OIL & GAS +0.23%
FINANCIAL SERVICES +0.08%
AUTO -1.27%
IT -1.17%
MEDIA -0.48%

Stocks Ban List

(SEBI) F&O ban list (BANDHANBNK close at -192.74), (IEX close at +194.65), (LTF close at -166.83), (TATACHEM close at +1100.35), (GNFC close at -643.85), (CHAMBLFERT close at -501.60), (NATIONALUM close at -217.31), (PNB close at +105.05), (MANAPPURAM close at -180.11), (HINDCOPPER close at -321.90), (SAIL close at -129.92), (GRANULES close at +609.05), (IDFCFIRSTB close at -72.22), and (RBLBANK close at +210.70) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

AARTIIND, EXIDEIND, BSOFT, ABFRL, NMDC, CANBK, GMRINFRA, PVRINOX, LICHSGFIN, PEL, ADANIENT, and BIOCON stocks has the possibilities of entrance in the ban list.

IDFCFIRSTB, and RBLBANK stocks has the possibilities of exit from the ban list.

Daily Pivots

As per the above pivots data, 24700 to 25100 is the Nifty 50 trading range.

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This article is only for educational purposes and is not an investment advice.