NIFTY OUTLOOK & TRADING TIPS FOR 19 NOVEMBER 2024

Market Report: November 18, 2024

Overview

The Indian equity markets extended their bearish trend for the 7th consecutive session, influenced by global and domestic factors. Weakness in key sectors like IT, Oil & Gas, and Telecom exerted downward pressure, while resilience in Banking, Metals, Auto, and FMCG helped benchmarks recover from intraday lows.

• Nifty: Closed 79 points lower.
• Sensex: Declined by 241 points.

Sectoral Performance

• Gainers:
  • Metals: Outperformed with a gain of 1.80%, driven by optimism around China's decision to reduce tax rebates on aluminum and copper.
  • Banking, Auto, FMCG: Showed resilience amidst market uncertainty.
• Losers:
  • IT: Declined over 2% due to subdued investor sentiment, fueled by concerns over reduced FED rate-cut expectations impacting BFSI spending.
  • Telecom, Oil & Gas: Contributed to the overall weakness.

Market Technicals

• Key Observations:

  • The market remains below its 200-day SMA, forming a bearish candle on daily charts.
  • Oversold conditions indicate a potential short-term pullback rally.

• Key Levels:

  • Support: 23,350 (Sensex) / 76,950 (Nifty).
  • Resistance: 23,600–23,700 (Sensex) / 78,000–78,200 (Nifty).
  • Failure to hold 23,350/76,950 may result in further downside to 23,200–23,175/76,500–76,400.

Public Sector Undertakings (PSUs)

• Declining Market Share:

  • PSUs now represent 15.34% of India’s total market capitalization, an 11-month low.
  • A decline from 17.77% in May 2024, the peak over the last seven years.
  • Combined PSU market capitalization: ₹66.06 lakh crore in November, a sharp fall from ₹81.38 lakh crore in July.

• Sectoral Losses:

  • Significant Decliners:
    • Mahanagar Telephone Nigam (-57%), Cochin Shipyard (-56%), Chennai Petroleum Corp (-55%).
    • Several others, including Garden Reach Shipbuilders and Ind Bank Housing, declined over 50%.

PSU Q2 FY25 Earnings Highlights

• Disappointing Results:

  • Nearly half of reporting PSUs underperformed.
  • 14 firms posted losses, while 29 experienced YoY declines in net profit.
  • 42 companies reported YoY declines in operating profit.

• Flat Growth:

  • Many PSUs displayed single-digit or marginal growth in net profits and operating margins, reflecting the challenging economic landscape.

• Key Challenges:

  • Valuation Adjustments: Peaked valuations led to profit booking.
  • Macroeconomic Pressures: Slower GDP growth, weak GST collections, and subdued government spending compounded market challenges.

Market Sentiment

The ongoing correction reflects alignment between fundamentals and valuations. While Q2 earnings failed to meet expectations, the correction creates opportunities for stock-pickers. However, concerns around operating and PAT margins persist despite robust order books.

Outlook

• Short-Term:

  • A technical rebound is possible from oversold levels if the market sustains above key support zones.
  • Consolidation may continue due to global uncertainties like rising US bond yields and domestic earnings challenges.

• Medium-Term:

  • Weak PSU performance and declining contributions to market capitalization signal a shift in market dynamics.
  • Investors are advised to adopt a cautious approach, focusing on sectors with strong earnings potential and lower vulnerability to macroeconomic fluctuations.

Recommendations for Traders

• Watch Levels: Maintain caution around 23,350/76,950 as a critical support zone.
• Stock Selection: Favor companies with robust fundamentals and resilient sectors like Metals and Banking.

Conclusion

Despite the bearish undertone, the market presents selective opportunities for investors willing to navigate through uncertainties. A combination of technical pullbacks and focused stock-picking could yield gains in the near term. However, challenges in macroeconomic indicators and sectoral performances necessitate a measured approach.