NIFTY OUTLOOK FOR MONDAY 28 OCT 2024

Key Market Indices Performance

• Sensex: Closed at 79,402.29, down 662.87 points or 0.83%
• Nifty: Closed at 24,180.80, down 218.60 points or 0.90%
• Bank Nifty: Experienced a significant drop, down 744 points, closing at levels indicating further downside potential.

Market Overview

The Indian equity markets continued their downward trajectory on October 25, 2024, with the Sensex dipping below the critical 80,000 mark, reflecting a weak sentiment across various sectors. The Nifty, after a brief pause, resumed its decline, closing just above the psychological support zone of 24,000. Broader market indicators, including major sectors like metals, autos, and energy, saw significant sell-offs, declining by nearly 2%.

The market downturn is primarily driven by several key factors:

1. Dismal Q2 earnings: Major companies reported lackluster results, especially in the consumption sector.
2. Foreign Institutional Investor (FII) Outflows: Continued FII selling has aggravated the pressure, possibly in response to global concerns and valuation adjustments.
3. Global Economic Slowdown: A sustained decrease in crude oil prices and signals of decelerating demand suggest a widespread economic slowdown, dampening sentiment further.

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Technical Analysis

• Nifty: Closed at 24,180, reflecting bearish momentum after testing 24,000-24,050, a crucial support region aligned with the daily lower Bollinger Band. There’s potential for a pullback to 24,350, but traders are advised to adopt a "sell on rise" approach. Key resistance lies at 24,500, with downside support at 24,000.

• Bank Nifty: This index has weakened, aligning with the overall market, and is expected to test the 49,400-49,500 support level. The structure suggests a continuation of the decline, with an eye on further sectoral losses in the financial segment.

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IPO Performance Outlook

• Deepak Builders: Expected to debut positively with a GMP of 24.63% (approximate listing price: Rs 253). The stock’s strong 41.54x subscription and solid fundamentals indicate potential upside. However, investors should adopt a cautious approach due to broader market volatility, considering partial profit booking on listing.

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Broader Market and Sectoral Outlook

Investors face a challenging landscape, influenced by:

• FII outflows: Driven by a shift towards the Chinese market and concerns over Indian valuations.
• Earnings Season: The disappointing results in the consumption and financial sectors reflect a slowdown, especially in urban demand.
• Retail and HNI Selling: The current correction has drawn sell-offs from high-net-worth individuals (HNIs) and retail investors, who have seen valuations dip substantially for the first time in recent months.

Strategic Insights

• Nifty's 200-DMA Support: The index is expected to test its 200-day moving average at approximately 23,400. A potential rebound may occur post-October expiry, though midcap and small-cap sectors could continue to face pressure.
• Investment Strategy: Investors with a long-term perspective might consider selectively adding quality large-cap stocks, especially in the financial sector where valuations are increasingly attractive.