NIFTY OUTLOOK & OPTION TRADING TIPS FOR 20 SEP 2024

The Indian equity market witnessed a volatile session on September 19, 2024, with the benchmark indices closing on a strong note. The Nifty ended the day at 25,415, up by 38 points, while the Sensex gained 236 points to settle at 83184. The rally was led by sectors such as banking, FMCG, and realty, with heavyweight stocks showing strength.

Key Market Highlights:

1. Nifty Performance:

   • The Nifty formed a Shooting Star pattern on the hourly chart, indicating a potential early sign of bearish reversal. Despite opening with a gap-up driven by positive global cues, the Nifty failed to close above the rising trendline resistance.
   • Support levels: 25,350 and 25,100-25,000 zone. If the Nifty breaks below these levels, further correction towards the 25,100-25,000 region is possible.
   • Resistance levels: 25,550-25,600 range. A convincing move above this level will indicate a bullish trend.

2. Sector Performance:

   • FMCG led the pack, with banking and realty sectors also posting strong gains.
   • On the downside, sectors like media, metals, telecom, PSU banks, and oil & gas experienced pressure, with some stocks shedding up to 3.5%.
   • The BSE Midcap index fell by 0.4%, and the Smallcap index dropped by 1%, underperforming the broader market.

3. Global Impact:

   • Indian markets reacted to the US Federal Reserve’s aggressive 50 bps rate cut announcement overnight, sparking a rally in early trades. However, profit-taking in sectors such as telecom, metals, and oil & gas reversed some of the gains.
   • With the Fed's policy behind us, investor attention will now shift to the RBI’s monetary policy next month, where another rate cut may be expected to support the domestic economy.

4. Stock Movers:

   • Top Gainers: NTPC, Nestle India, Titan Company, Kotak Mahindra Bank, and Tata Consumer Products were among the key stocks leading the market rally.
   • Top Losers: BPCL, Coal India, ONGC, Adani Ports, and Shriram Finance faced selling pressure and ended the day in the red.

Technical Outlook:

• The Shooting Star candlestick pattern at record levels, coupled with potential bearish divergence in the RSI, suggests a likely consolidation or a reversal in the coming sessions. The Nifty’s consolidation range is expected to be between 25,300-25,500, and the next directional move will be determined by a break above or below this range.

Market Sentiment:

• The sentiment remains cautious, with traders advised to take a balanced approach by maintaining positions on both sides. A focus on index heavyweights like banking and FMCG sectors is recommended, as these sectors are demonstrating relative strength.

Conclusion:

• The Indian equity market is currently in a consolidation phase after a record high rally. Strong support is seen at the 25,100-25,200 level, and a decisive breakout or breakdown will determine the future market direction.
• Market participants should monitor the upcoming RBI monetary policy for cues on further rate cuts, which could provide a boost to sectors like banking and realty. Profit booking in midcap and smallcap stocks, which are trading at premium valuations, may continue in the short term.