Following a period of volatility, the Indian markets posted a strong recovery on 5th November, led primarily by gains in the banking sector. The Nifty 50 closed at 24,213.30 (+0.91%), while the Sensex rose by 0.88% to close at 79,476.63. Improved sentiment in key sectors and supportive global cues helped lift the indices, though foreign institutional selling remained a pressure point.
1. Market Recap – Key Movers and Sectoral Performance
On Tuesday, market breadth favored the bulls, with the banking and metal sectors driving the rally. Here’s a breakdown of the major contributors:
- Top Gainers:
- Banking Sector: Stocks like HDFC Bank (NS:HDBK), ICICI Bank (NS:ICBK), and State Bank of India (NS:SBI) led gains as the sector witnessed strong buying interest, possibly driven by domestic institutional flows.
- Metals and Auto: JSW Steel (NS:JSTL) and Bajaj Auto (NS:BAJA) also recorded substantial gains, reflecting positive sentiment in metals amid expectations of improved demand.
- Top Losers:
- Coal India (NS:COAL) and Adani Ports faced selling pressure, which tempered gains in the broader index.
The rally in banking stocks was a notable factor, as the sector accounts for a significant portion of the Nifty 50’s weighting. Strong performance here provides an essential backbone for market stability, especially given ongoing foreign outflows.
2. FII/DII Activity and Market Sentiment
Institutional flows continue to be a decisive force in the market:
- Foreign Institutional Investors (FIIs): Net sellers in the cash market with -₹2,569.41 crore, FIIs continued to offload positions, reflecting a cautious stance amidst global uncertainty. However, a significant buying position in Index Options (+₹41,965.62 crore) suggests that FIIs might be hedging against potential volatility, which could lead to sharp swings or there has been aggressive short covering which is most likely scenario ahead of key events.
- Domestic Institutional Investors (DIIs): DIIs countered FII selling with a net inflow of ₹3,030.96 crore in the cash market, showing strong domestic confidence and helping offset the impact of FII outflows.
Implication: Persistent FII selling could act as a dampener for sustained bullish momentum, but robust DII buying suggests that local investors are willing to support the market at lower levels, providing some degree of stability.
3. India VIX and Volatility Analysis
The India VIX closed at 16.12, down by 3.4%, indicating a reduction in expected market volatility. The decrease in VIX suggests that investors are slightly more comfortable with current market levels, but caution remains due to FII hedging activity and upcoming global events.
Implication: While a lower VIX is generally positive for the market, the significant buying in FII options indicates that larger players are positioning for potential volatility, possibly linked to external factors such as the U.S. elections and Federal Reserve policy stance.
4. Technical Analysis – Daily and 5-Minute Chart Insights
Daily Chart Analysis
The Nifty 50 daily chart shows the formation of a Piercing Pattern, which is typically a bullish reversal signal. This pattern, formed after a period of declines, suggests that buyers are stepping in at lower levels, especially near the 150-DMA (23,800)which provided strong support.
- RSI: Positive divergence in the Relative Strength Index (RSI) indicates strengthening buying momentum, implying that the market may attempt to sustain its recent gains if momentum continues.
Intraday 5-Minute Chart Analysis and Fibonacci Levels
The 5-minute chartfor intraday trading reveals strong support and resistance levels based on Fibonacci retracement:
- Support Levels:
- 24,080 – First Fibonacci support.
- 23,950 – Deeper support based on recent price action.
- 23,800 – Strong technical support near the 150-DMA, and critical for maintaining bullish sentiment.
- Resistance Levels:
- 24,300 – Key resistance observed from intraday price action.
- 24,370 – Next (LON:NXT) Fibonacci resistance, where selling may increase if this level is tested.
- 24,450 – Upper resistance, which could act as a cap on intraday gains unless buying momentum picks up significantly.
Implication: If Nifty sustains above 24,080 in the early session, it could aim for 24,300 and possibly 24,370. A fall below 24,000 could bring 23,950 and 23,800 into play as support zones.
5. Option Chain Analysis for 7th November Expiry
The latest option chain data for Nifty shows concentrated open interest at the following levels:
- Support (Put OI):
- 24,000 Strike: Highest Put OI, indicating a robust support level for Nifty.
- 23,500 Strike: Significant Put OI, suggesting additional support in case of a breakdown below 24,000.
- Resistance (Call OI):
- 24,500 Strike: Highest Call OI, suggesting strong resistance at this level.
- 24,300 Strike: Additional resistance with moderate Call OI.
Implication: The 24,000 level remains a crucial support, with 24,500 as a key resistance. Traders should watch for changes in OI at these levels to gauge intraday sentiment and potential shifts in market direction.
6. Outlook and Trading Strategy for 6th November 2024
Given the mixed data, the market outlook is cautiously optimistic, with the following scenarios in mind:
Bullish Scenario
- Conditions: Sustained buying interest above 24,080 with supportive global cues.
- Targets: Potential upside targets at 24,300 and 24,370 if buying pressure holds.
- Trigger: Any positive news or global stability could drive further gains, particularly if DIIs continue to support the market.
Bearish Scenario
- Conditions: Failure to sustain above 24,000, coupled with FII selling.
- Targets: Potential downside towards 23,950 and 23,800 if selling intensifies.
- Trigger: Rising global uncertainties or weak opening cues could trigger profit booking or additional selling pressure.
Range-Bound Scenario
- Conditions: Consolidation between 24,000 and 24,300 as the market digests recent gains.
- Range: 23,950–24,370 for intraday trading opportunities.
- Trigger: Lack of strong directional cues may lead to choppy, range-bound trade within this band.
Conclusion
The market’s ability to hold above 24,000 will be crucial in determining near-term direction. While the bullish momentum from banking and metal stocks provides optimism, FII selling and global uncertainty pose risks. Traders should watch for early signs of strength or weakness around key support and resistance levels and adjust positions accordingly.
Key Levels to Watch:
- Support: 24,000, 23,950, 23,800
- Resistance: 24,300, 24,370, 24,500
Trading Strategy for 6th November:
- For Long Positions: Consider entries near 24,080 with targets at 24,300 and 24,370, placing a stop-loss around 23,950.
- For Short Positions: If Nifty fails to hold 24,000, short positions can target 23,950 and 23,800 with a stop-loss at 24,150.