Market Report and Outlook for Indian Equity Indices (June 10)

Market Summary:

On June 10, the Indian equity markets ended a volatile session with marginal declines. The benchmark indices, the Sensex and the Nifty, closed lower despite hitting an all-time high during the trading day. The Sensex dropped by 203 points (0.27%) to settle at 76490, while the Nifty fell by 31 points (0.13%) to close at 23259. Despite the negative close, market breadth was positive with 2,381 shares advancing, 1,176 shares declining, and 91 shares remaining unchanged.

Key Highlights:

• Nifty Performance: The Nifty opened with a gap-up and reached an all-time high of 23411 but failed to sustain this level, closing at the day's low. Resistance was observed at the 23,300 level, with immediate support in the 23,000-22,900 zone. A break below this range could lead to aggressive selling pressure.
• Sectoral Performance:
  • Top Losing Sectors: IT (-1.5%), Metal (-0.3%), Oil & Gas (-0.2%).
  • Top Gaining Sectors: Realty (+1.3%), Healthcare (+0.7%), Power (+0.4%).
• Top Losers on Nifty: Tech Mahindra, Infosys, Wipro, M&M, LTIMindtree.
• Top Gainers on Nifty: UltraTech Cement, Grasim Industries, Hero MotoCorp, Cipla, Power Grid Corp.
• Market Volatility: The India VIX, a measure of market volatility, decreased by 2.71%, settling at 16.425, indicating reduced market fear.
• Midcap and Smallcap Performance: The BSE midcap index rose by 0.5% while the smallcap index gained 1%.

Technical Analysis:

• Nifty Analysis: The Nifty experienced a sharp rally of approximately 2,100 points over the past week. The hourly momentum indicator suggests a negative crossover, indicating a loss of momentum. The index is likely to consolidate within the 23,000-23,500 range in the near term.

  • Support Levels: Immediate support is at 23,160-23,100, with a crucial support zone at 23,000-22,900. Failure to sustain these levels could lead to a decline towards 22,930.
  • Resistance Levels: Immediate resistance is at 23,420-23,500. A close above 23,350 could propel the index to new highs near 23,500 and beyond.

• Bank Nifty Analysis: The Bank Nifty faced resistance at the 50,250 mark, corresponding with the 78.6% retracement level. The index is poised for consolidation with crucial support at 49,320-49,070 and immediate resistance at 50,250-50,350.

Market Outlook:

The Indian equity market is expected to remain volatile and consolidate within a broad range. The lack of fresh catalysts post the formation of the new government suggests potential for near-term consolidation. Institutional flows show a mixed trend, with Foreign Institutional Investors (FIIs) covering shorts and Domestic Institutional Investors (DIIs) booking profits at historic highs.

• Economic Factors: Optimism about a rate cut is waning due to healthy US economic data, with the Federal Reserve expected to maintain its current stance. Any deviation from the anticipated rate cut could test market patience.
• Volatility Expectation: With the India VIX settling lower, reduced market fear is anticipated in the near term.

Investment Strategy:

Investors are advised to adopt a cautious approach given the current volatility and potential consolidation phase. Key strategies include:

• Monitoring Support and Resistance Levels: Keeping an eye on crucial support and resistance levels for both Nifty and Bank Nifty to make informed trading decisions.
• Sector Rotation: Considering sectors showing strength such as Realty, Healthcare, and Power for potential investment opportunities.
• Risk Management: Employing proper risk management techniques to navigate the expected market consolidation and volatility.

Conclusion:

The Indian equity markets are likely to experience a period of consolidation within the 23,000-23,500 range for the Nifty. Investors should remain vigilant, focusing on sector-specific opportunities and adhering to disciplined risk management practices amidst the current market dynamics.