Following another strong session, the Indian equity markets showed resilience with the Nifty 50 closing at 24,484.05 (+1.1%) and the Sensex climbing by 901.50 points to end at 80,378.13 (+1.1%) on November 6, 2024. The market rally was driven largely by gains in the IT and realty sectors, while the Nifty Bank and select financial stocks saw mild profit booking.
1. Market Recap – Key Movers and Sectoral Performance
On Wednesday, the market witnessed broad-based buying, with particular strength in the IT and realty sectors. Here’s a breakdown of the major contributors:
- Top Gainers:
- IT Sector: Infosys (NS:INFY), TCS (NS:TCS), and HCL Technologies (NS:HCLT) led the gains in the IT sector, driving the Nifty IT index up by 4.16%, marking its best single-day gain since June.
- Realty Sector: The Nifty Realty index also surged, reflecting investor confidence in real estate stocks amid improved sentiment.
- Top Losers:
- Nifty Bank and Financial Services: The banking sector saw selective profit booking, with Nifty Bank declining by -6,891.33 crore in net flows, while financial services showed minor declines as investors locked in profits after recent gains.
Overall, the breadth of the market was positive, with gains across midcap and smallcap stocks as well, indicating broad participation in the rally.
2. FII/DII Activity and Market Sentiment
Institutional flows continue to play a pivotal role in shaping market sentiment:
- Foreign Institutional Investors (FIIs): FIIs were net sellers in the cash market with an outflow of ₹4,445.59 crore, reflecting ongoing caution due to global macro uncertainties. However, FIIs were buyers in the derivatives market, with net positive positions in index options (+₹9,337.21 crore), indicating potential hedging activity.
- Domestic Institutional Investors (DIIs): DIIs countered FII selling with net purchases of ₹4,889.33 crore in the cash market, providing strong support to the bullish momentum.
Implication: Persistent DII buying is helping to offset FII outflows, stabilizing the market and fostering positive sentiment, particularly in high-growth sectors like IT.
3. India VIX and Volatility Analysis
The India VIX dropped sharply by 7.8% to close at 14.87, signaling a decrease in expected market volatility. This decline indicates improved investor confidence and suggests a lower probability of sharp swings in the near term. The reduction in VIX, combined with DII support, provides a favorable environment for continued market gains.
Implication: A lower VIX typically aligns with a bullish or stable outlook, reducing the likelihood of sharp downside moves in the immediate future.
4. Technical Analysis – Daily and 5-Minute Chart Insights
Daily Chart Analysis
The Nifty 50daily chart shows a continuation of the bullish momentum following a breakout from recent consolidation levels.
- Fibonacci Support and Resistance:
- Key Fibonacci retracement levels are identified as follows:
- Support: 24,300 (key breakout level) and 24,100 (38.2% retracement from recent lows).
- Resistance: 24,540 (61.8% retracement) and 24,780 (recent high), which may act as barriers if the index tests these levels.
- Key Fibonacci retracement levels are identified as follows:
- Moving Averages:
- Nifty is trading above its short-term moving averages, suggesting the continuation of positive momentum in the short term.
- Candlestick Pattern:
- The bullish candle formed on November 6, with increased volume, reinforces the potential for continued upside in the near term.
Intraday 5-Minute Chart Analysis and Fibonacci Levels
The 5-minute intraday chartshows strong intraday buying interest, especially in the latter half of the session.
- Intraday Fibonacci Levels for November 7:
- Resistance Levels: 24,500 (intraday high) and 24,580.
- Support Levels: 24,400 and 24,300.
Implication: Maintaining above the 24,400 level intraday could lead to a push towards the 24,500–24,580 resistance range, while a failure to hold could see a retest of 24,300.
5. Option Chain Analysis for 7th November Expiry
Analysis of the option chain for Nifty provides additional insights into market positioning:
- Call OI Concentration:
- Strong resistance is seen at the 24,500 and 24,700 levels, suggesting these may act as caps for any significant upward movement in the short term.
- Put OI Concentration:
- Significant support levels are indicated at 24,300 and 24,000 strikes, suggesting bulls may defend these levels.
- Max Pain Level:
- The Max Pain point is at 24,300, aligning with technical support, indicating that this level is likely to act as a pivot for the current expiry.
Implication: High put OI at 24,300 and 24,000 indicates strong support, while the call OI at 24,500 and 24,700 reflects potential resistance zones.
Market Outlook for November 7, 2024
The outlook for Nifty 50 on November 7 is cautiously optimistic based on the current data, as summarized below:
- Bullish Continuation Possible: Given the strong DII buying, reduced VIX, and positive technical structure, there is potential for the Nifty to test higher levels if it holds above 24,300.
- Key Levels to Watch:
- Upside Resistance: 24,500 and 24,580, with an extended target of 24,780 if momentum sustains.
- Downside Support: 24,400 and 24,300 are crucial support levels; a break below 24,300 could lead to a retest of 24,100.
Trading Strategy for 7th November:
- For Long Positions: Consider entries near 24,400 with a target of 24,500–24,580, using a stop-loss at 24,300.
- For Short Positions: If Nifty fails to sustain above 24,500, short positions can target 24,300 with a stop-loss at 24,580.
Conclusion: With strong buying interest in IT and realty, reduced volatility, and robust support from DIIs, the market shows a bullish bias for the near term. However, caution is advised around key resistance levels, as profit booking might emerge. Traders should monitor intraday levels closely, especially around the 24,500 resistance and 24,300 support.