The S&P BSE Sensex rose 226.6 points or 0.29% to settle at 78,699, while the broader Nifty 50 index rose 63.20 points or 0.27% to close at 23,813.40.
Analyst Rahul Ghose, founder of Hedged.in, interacted with ET Markets on the outlook for Nifty and Bank Nifty along with key levels of the index. Below are edited excerpts from his chat.
Nifty ended the week near the 23,800 level, but what are the immediate support and resistance zones for next week?
The weekly December closing prices formed a neutral candlestick, indicating indecision among buyers and sellers. This is a typical situation at the end of December, as market activity tends to slow due to the holiday season. In the short term, market support is seen in the 23,200-23,300 range. There was a small pro-gap in this area and a decent rebound in November 2024. However, given that the price did not rise significantly from this support level, we expect the rebound to be short-lived. Further decline is likely towards the next support level between 22,900 and 22,600. On the upside, the 24,500-25,000 range has been identified as a strong resistance zone. The 25,000 level is particularly significant due to the large amount of open interest (OI) accumulated in call options, suggesting that the index is unlikely to break through this level in the short term.
What do you think about the index struggling with the 200-day moving average when determining short-term trends?
That’s clearly a negative sign. Recent examples have shown strong rebounds whenever the index approaches the 200 DMA. This is to be expected in a healthy market. However, recent price action surrounding the 200 DMA has been characterized by neutral to indecisive candlesticks.
This, combined with the fact that the RSI level is hovering around 34-35, further suggests that a decisive break below the 200-day moving average is likely. Keep an eye on Reliance Industries (RIL), which has the highest weightage in the Nifty index. Well below 200 DMA. Most of the Nifty 50 constituents are also trading below the 200 DMA. In the last few sessions, HDFC Bank and some IT stocks have supported the index’s rise, but a few stocks alone cannot sustain the index’s rise. Broad participation is essential.
Is Bank Nifty above 200 DEMA a better bet?What trends do you foresee?
Nifty Bank has survived mainly because it has outperformed HDFC Bank. The remaining banks such as SBI, Axis Bank and IndusInd Bank are in strong decline and are also trading well below the 200 DMA. Sooner or later, even Bank Nifty may give way. Technically, a break below the 49,600 level is likely to trigger a sharp decline in Bank Nifty.
FIIs have been showing consistent selling pressure recently even in low trading volumes. How could this trend affect market sentiment? And which sectors are likely to bear the brunt of this selloff?
FIIs have made large sales in three major sectors: oil and gas (nearly Rs 5,300 crore), automobiles (nearly Rs 1,800 crore) and FMCG (nearly Rs 1,600 crore).
These three sectors are likely to remain under pressure. Given the quality of companies in this sector and the fact that many stocks are already down 30-40% from their highs, FMCG could receive some support at lower levels. This sector is also likely to recover the fastest once conditions improve.
However, the auto and oil and gas sectors could see further selling before things return to normal. For example, in the oil and gas sector, ONGC and oil are forming a strong bearish pattern on both monthly and quarterly charts.
What does the December-January series rollover data suggest about trader expectations? Will higher short positions be rolled over?
Rollover data from December to January shows cautious optimism, with a slight increase in short positions and carryover. This suggests that traders are hedging their positions against potential downside risk, reflecting uncertainty in the near-term outlook. An increase in rollovers at higher open interest levels would signal renewed confidence, but that has not yet been observed.
Is there a good sector or stock to take a position on based on rollover data?
Rollover data suggests strength in sectors such as pharmaceuticals, where positions are being rolled over with a positive bias. Stocks like Sun Pharma and Lupine appear to be technically well-positioned, offering opportunities for traders and investors alike. Some bank stocks, especially private banks, have also seen healthy rollovers, indicating further upside potential. In the banking sector, HDFC Bank and ICICI Bank look solid.
What is the sentiment on the January series considering technical and derivative indicators?
Sentiment for the series in January appears to be cautiously optimistic. Key derivatives metrics such as the Put-Call Ratio (PCR) and Volatility Index (VIX) suggest that the market is unlikely to experience extreme volatility. However, upside is likely to be limited unless FII inflows recover meaningfully and global cues improve. In the January series, movements by stock will be dominant, and there is a possibility that the series will trend towards consolidation. Additionally, traders and investors will be keeping an eye on Trump’s immediate actions after taking office on January 20th.
Could we see a recovery or further consolidation in the early weeks of 2025?
The first few weeks of 2025 could see further consolidation as markets digest global macroeconomic trends and third-quarter earnings. If global uncertainties such as the US Federal Reserve’s policies and China’s growth trajectory are clear, a recovery is likely. Domestic factors such as the budget outlook and consistent DII inflows could provide additional support. If we look at history, it is clear that markets tend to move in cycles. Nifty had a strong rally from 2012 to 2016, followed by consolidation during the year before the coronavirus outbreak (2016-2020).
In 2020-21, Nifty moved from 7,500 to 18,000 and then consolidated for another year. In a similar pattern, the increase from 15,500 in September 2022 to 26,000 in September 2024 is likely to be followed by a year of consolidation. After all, if you have to go far, you need to catch your breath to cover that distance. 2025 may be the year to catch your breath.
Do you think global uncertainties still weigh on the Indian market? What are your expectations for the third quarter performance?
Global uncertainties such as the US Federal Reserve’s interest rate trajectory, geopolitical tensions, China’s economic recovery and President Trump’s policies continue to weigh on Indian markets. As far as Q3 revenues are concerned, analysts expect India’s December quarter sales to continue to rise, driven by improved rural demand and higher government spending, and also supported by the festival season .
However, headwinds such as uneven urban demand and rising global uncertainty could weigh on growth in the second half of the fiscal year. Overall, India’s operating margin (OPM) is expected to improve in the coming quarters.
Do you have any recommended stocks or sectors that are poised for next year?
2025 will be a year of stock picking, unlike last year, when almost everything went up. Particularly in 2025, we expect the pharmaceutical industry to perform well, with IT companies such as Lupine, Cipla, Dr. Reddy, and major IT leading companies (TCS, Wipro, HCL Tech, Infi) and some mid-cap stocks. Stocks can be closely monitored. IT stocks. The entire IT population is likely to benefit positively from the AI boom, which will be further strengthened by new U.S. leadership.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of Economic Times)
