NIFTY OUTLOOK & TRADING TIPS FOR 29 MAY 2024

Overview

The Indian benchmark indices experienced a volatile trading session on May 28, 2024, with both the Sensex and Nifty closing lower. The Sensex declined by 220 points (0.29%) to 75,170, while the Nifty fell by 44 points (0.19%) to 22,888.

Nifty Performance

Nifty witnessed another day of consolidation, opening on a positive note but succumbing to profit booking at higher levels. The index closed with a loss of approximately 44 points, forming another bearish candle on the daily chart. Over the past three trading sessions, Nifty has been consolidating around the 23,000 mark. This trend is expected to continue until the expiry of the May series, with potential retests of the breakout zone between 22,800 and 22,750.

Key Levels

• Support: 22,800 (coincides with 40-hour moving average)
• Resistance: 23,110 (immediate resistance)
• Consolidation Range: 22,700 - 23,100

Sectoral and Stock Performance

• Top Nifty Losers: Adani Ports, Power Grid Corp, Coal India, Adani Enterprises, BPCL.
• Top Nifty Gainers: Divis Laboratories, SBI Life Insurance, HDFC Life, Grasim Industries, Hero MotoCorp.
• Sectoral Performance:
  • Top Performers: Pharma, Media.
  • Underperformers: Oil & Gas, Capital Goods, Telecom, PSU Bank, Power, Realty (down 1-2%).

Broader Market Indices

• BSE Midcap: Down 0.5%.
• BSE Smallcap: Down 1%.

Bank Nifty

The Bank Nifty index experienced some profit booking at higher levels, closing down approximately 140 points. Despite this, the overall outlook remains positive, with the recent dip viewed as routine profit booking rather than a trend reversal.

Key Levels

• Support: 49,000 - 48,800
• Resistance: 49,350 - 49,500
• Momentum Indicators: RSI at 61, maintaining above 14-day EMA

Market Sentiment

The market exhibited mild consolidation post the recent sharp surge. With uncertainty and elevated India VIX, volatility is expected to persist as the market approaches the election outcome.

Trading Strategy

• Nifty: Traders should utilize dips towards the lower end of the 22,700 - 23,100 range to accumulate quality largecap and large midcap stocks.
• Bank Nifty: A buy-on-dips strategy is recommended, with a stop-loss at 48,700.

Call and Put Writing

Significant call writing was observed at the 23,000 strike price, followed by 23,100 and 22,900 strikes, indicating strong resistance at these levels. The decline in the Put-Call Ratio (PCR) due to less active put writing suggests a cautious market stance.

Conclusion

The Nifty's ongoing consolidation phase is likely to persist, maintaining the index within the 22,700-23,100 range. Despite the consolidation, the underlying earnings growth for the March quarter has been above expectations, which supports current valuations. Traders are advised to focus on accumulating quality stocks during dips and closely monitor the performance of IT and FMCG sectors for further cues. The market's volatility is expected to continue, driven by external uncertainties and domestic economic indicators.