“The drag was across sectors led by realty, auto, and FMCG except IT stocks, which gained due to expected benefits from US rate cuts and defensive nature. The pessimism on the market is expected to continue in the near term amidst rising crude prices and fund flows to cheaper markets like China,” said Vinod Nair, Head of Research, Geojit Financial Services.
Analysts expect the market to consolidate amid cautiousness due to fear of geopolitical tensions and FII selling. Here are the key factors that will decide action on Dalal Street:
1) FII mood
A ‘Buy China, Sell India’ trade is getting played out in emerging markets as FIIs have sold Indian stocks worth around Rs 30,718 crores in the first 3 days of October.
“The Hang Seng index shot up by 26% in the last month and this bullishness is expected to continue since valuations of Chinese stocks are very low and the Chinese economy is expected to do well in response to the monetary and fiscal stimulus being implemented by the Chinese authorities,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
2) Global markets
The Dow posted a record closing high on Friday and the Nasdaq ended with a more than 1% gain as a stronger-than-expected jobs report reassured investors who had worried the economy may be getting too weak.US job gains increased in September by the most in six months, and the unemployment rate fell to 4.1%, the report showed.3) Crude oil
On a weekly basis, Brent crude gained over 8%, the most in a week since January 2023 on the mounting threat of a region-wide war in the Middle East.
A spike in crude oil is bad news for India as it is an additional burden on the import bill.
4) Elections
Market watchers will also be tracking the outcome of the assembly election in Haryana, and Jammu and Kashmir on Tuesday. If exit polls are to be believed, Congress may reclaim power in Haryana while J&K may face a hung house.
5) Technical factors
With Nifty closing just at the key 50-EMA support, this has been one of the sharpest weekly drops in recent times, forming a strong bearish candle on the weekly chart, signaling more potential downside ahead.
“Given these observations, further pain is on the cards, with the next key support around the September swing low of 24,750 followed by 24,500. However, traders should exercise caution with short positions, as some in-between bounces cannot be ruled out due to oversold conditions in momentum indicators on intraday charts. On the upside, Friday’s high near 25,500, which coincides with the 20-EMA and the channel breakdown level, will act as a stiff resistance, with 25,300 being the immediate resistance before that,” said Rajesh Bhosale, Equity Technical Analyst, Angel One.
6) RBI policy
The RBI is expected to keep the benchmark repo rate unchanged in its upcoming policy review to be announced on October 9, maintaining it at 6.5% for the ninth consecutive meeting in August 2024.
Analysts say that if oil prices continue to spike, a higher inflation scenario could further delay the prospects of a rate cut by the RBI.
7) Q2 earnings
The September quarter earnings season kicks off this week starting with companies like TCS, Tata Elxsi, DMart, and IREDA, among others.
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