Sensex, Nifty expected to open weak; analysts foresee volatility

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Indian benchmark indices Sensex and Nifty are expected to open with a downward bias on Thursday amid weak global cues. With the Budget being negative for markets (due to taxes on investments and STT) and weaker-than-expected results reported by India Inc. so far, analysts expect the correction to set in sooner. Gift Nifty at 24,142 points to a weak start as Nifty August futures are ruling at 24,492. 

Amisha Vora – Chairperson & MD at Prabhudas Lilladher, said the market reaction to the recent budget announcement signals an immediate response to the adjustments in capital gains taxes that investors had anticipated, confirming the government’s commitment to restraining speculative excesses while laying the foundation for sustainable growth. “The increasing monthly SIP inflows and expanding mutual fund participation exemplify the developing trend of financialization of savings in India, forming a solid basis for future market resilience,” she added.

According to experts, settlement of monthly derivative contracts at the National Stock Exchange will keep the market volatile during the day, and stock-specific action will continue.

Ruchit Jain, Lead Research, 5paisa.com, said: “While we have seen some event based volatility in last couple of sessions, there seems to be more of stock specific interest in the market while the index is going through a corrective phase. This seems to be a time-wise correction for the index as the broader markets have been doing well, while the RSI oscillator on the benchmark is hinting at a continuation of the corrective phase. Hence, traders are advised to trade with a stock specific approach for the near term.” 

Meanwhile, stocks across Asia are in deep red, led by Japanese stocks slumping over 2.5 per cent. Overnight, the S&P 500 and Nasdaq ended at multi-week lows, with the S&P snapping one of its longest streaks without a daily decline of more than 2%, due to lacklustre earrings posted by index heavyweights such as Alphabet and Tesla.

According to Dhupesh Dhameja, Technical Analyst, SAMCO Securities,  recent activity in the options market reveals a shift in sentiment, with investors focusing more on writing put options than call options. Significant open interest is seen at the 25,000 call and 24,000 put options, with notable trading interest in the 24,400 puts and 24,500-24,600 calls. T”he Nifty Put-Call Ratio (PCR) has declined from 0.95 on Tuesday to 0.76, indicating a decreasing preference for puts over calls. The max pain level is positioned at 24,400, anchoring the index’s movement,” he said.

Based on current data and market sentiment, a bearish outlook will prevail if the Nifty sustains below the 24,300 level, said Dhameja. 

Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd, said technically, the index on a daily scale had formed a small bearish candle following the formation of a hammer candle yesterday. “Thus, the 24,070-24,000 range will act as a demand zone for the Nifty in the short term. On the upside, the high of the bearish engulfing candle is placed near 24,855. Until the index conquers these levels, a fresh rally appears difficult for the index, in the short term,” he said.