Saturday, February 3, 2024

NIFTY WEEKLY OUTLOOK & OPTION CALL PUT TIPS FOR 05 FEB TO 9 FEB 2024

A conservative interim budget failed to deter the market's growth momentum, which continued to surge amid the pre-election rally. The substantial reduction in the fiscal deficit target contributed to a decline in bond yields, leading to lower corporate borrowing costs and heightened incentives for increased investment. Additionally, the Federal Reserve signaled a cautious approach to interest rate cuts until March '24, while reporting a cooling inflation trend in the US. Friday witnessed a volatile trading session, with the benchmark experiencing sharp fluctuations before closing with modest gains. Despite an initial surge that took Nifty towards its record high, the market couldn't sustain those levels, and most gains were relinquished. Notably, energy, metal, and IT sectors recorded strong gains, while banking and FMCG sectors closed in the red. Small-cap indices managed to gain nearly a percent. The market concluded the Budget week with its most significant weekly gains in two months, as both the Sensex and Nifty rose by 2 percent each. Despite the Federal Reserve's indication of no rate cuts until March '24, the benchmark equity indices ended on a positive note. Following a muted reaction to the Interim Budget in the previous session, the market posted substantial gains on February 2, reaching new highs. Nifty hit 22,126.80, and the Sensex rallied over 1,400 points.

However, profit-booking at higher levels led to a partial retreat from the day's high, with the Sensex closing at 72,085, down 0.61%, and the Nifty closing at 21,853, down 0.72%.

Positive global cues and initial gains were offset by profit-booking, resulting in the Sensex closing 1,003 points lower than the day's high, and the Nifty shedding 273 points from its peak.

Nifty Bank index turned negative, losing 0.5% after reaching an intraday high of 46,892 at 45,970. Maintaining the current Nifty level is crucial, as a failure could lead to a sideways trend. Sustainability above 22,150 is deemed necessary for a march towards 22,500+. Banking majors' consistent participation is critical for a steady trend; otherwise, the market may continue in a range-bound pattern.

Although Nifty surpassed 22,000, it formed a double top on the hourly chart, indicating caution. A decisive breakout above 22,125 is needed for confirmation of a bullish trend resumption. Conversely, a break below the support level at 21,500 may indicate bearish momentum. A breakout above 22,150 could propel Nifty towards 22,500 and beyond.

Daily and hourly momentum indicators present a divergent signal, and prices remain within a range, with Bollinger bands contracting, signaling range-bound price action. The consolidation is expected to persist, with stock-specific actions and sector rotations driving market movements. Key support levels are identified at 21,660 – 21,600, while an immediate hurdle zone is placed at 22,100 - 22,150.

Bank Nifty faced selling pressure around the 46,900 – 47,000 zone, aligning with the 61.82% Fibonacci retracement level. The short-term perspective suggests a consolidation phase for Bank Nifty in the range of 47,000 – 45,500.

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