Trade Setup For Oct. 23: Nifty 50 Support At 24,200 Amid Increasing Bearish Sentiment
Analysts warn that the Nifty 50 index has confirmed a bearish trend, with a significant support level identified at 24,200, where a bullish gap was previously established in August.
The Nifty 50 index saw a flat start on Tuesday, but the selling pressure dragged the Nifty index to close below the 24,500 mark. Analysts expect pressure to continue with the charts indicating further downside.
After trading within a range for the past couple of weeks, prices have broken out to the downside, confirming a lower top-lower-bottom structure on the daily chart.
This also broke the critical neckline of the head and shoulder pattern, which indicate a reversal from the bullish momentum. This comes as the October sell-off is mirroring the rise seen in September, according to Rajesh Bhosale, Equity Technical Analyst, Angel One.
He also added that prices have slipped below the 89 DEMA for the first time since June.
The key support for Nifty 50 will be at 24,200, where a bullish gap was left in August, with immediate support at 24,300, said Bhosale. While resistance would be at 24,650-24700.
Shrikant Chouhan, Head Equity Research, Kotak Securities, indicated that if the market is trading below the support levels, the index could fall to 24,250 levels, while on the upside it could touch 24,700 levels.
Bank Nifty that was holding on till yesterday also saw a breakdown amid selling pressure. The support for Bank Nifty is placed at 51,000 below which the index could fall to 50,200 levels, said Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas. He also added that on the upside, 51,800-51,900 could act as an immediate hurdle for Bank Nifty.
"A sustained break below 51,000 could trigger further downside momentum, potentially leading to a more pronounced decline in Bank Nifty,” added Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment.
Market Recap
The NSE Nifty 50 and the BSE Sensex closed at the lowest level in over two months on Tuesday as the share price of heavyweights Reliance Industries Ltd. and HDFC Bank Ltd. dragged. Broad-based weakness in US stocks and Asian and European shares due to concern about the pace of unwinding of monetary conditions in the US also seeped into the Indian markets.
The Nifty 50 ended 309 points or 1.25% down at 24,472.10, and the Sensex closed 930.55 or 1.15% down at 80,220.72, the lowest level since Aug 14.
F&O Action
The Nifty October futures were down by 1.06% to 24,538 at a premium of 66 points, with the open interest up by 1.7%.
The Nifty Bank October futures were down by 1.24% to 51,434 at a premium of 177 points, while its open interest was up 3.3%.
The open interest distribution for the Nifty 50 Oct. 24 expiry series indicated most activity at 25,000 call strikes, with the 24,000 put strikes having maximum open interest.
For the Bank Nifty options expiry on Oct. 23, the maximum call open interest was at 52,500 and the maximum put open interest was at 51,000.
FII/DII Action
Overseas investors remained net sellers of Indian equities for the 17th consecutive session on Tuesday, while domestic institutional investors stayed net buyers for the 21st straight session.
The FPIs offloaded stocks worth Rs 3,978.6 crore, according to provisional data from the National Stock Exchange. The DIIs bought stocks worth Rs 5,869.1 crore.
Major Stocks In The News
Reliance Infrastructure: The company's subsidiary Reliance Defence would set up the largest integrated project to manufacture explosives, ammunition and small arms in Ratnagiri, Maharashtra. The company has been granted 1,000 acres of land at the Watad Industrial Area to build the Dhirubhai Ambani Defence City. Over the next 10 years, Reliance Infrastructure will invest over Rs 10,000 crore.
Reliance Industries: The Competition Commission of India on Tuesday has approved the merger of the company with Disney after modifications in the deal. One of the conditions includes no bundling of TV ad slot sales for IPL, ICC and BCCI cricketing rights till the end of existing rights. The parties will also sell seven TV channels, including Hungama and Super Hungama, according to the 48-page detailer order by CCI.
Bajaj Finance: The lending firm has increased its credit costs guidance to 2.00-2.05% for the current financial year from 1.75%-1.85% earlier, Managing Director Rajeev Jain said in a post-earnings analysts call. The reason behind this hike in credit cost guidance is because the company said it is experiencing stress in its rural B2C loans and two- and three-wheeler finance. "Clearly, that portfolio (rural B2C) has grown in single digits in the last six quarters. We foresee that the portfolio will remain yellow. We only expect that business to grow by only 12–14% on a full-year basis," Jain said.
Global Cues
Asian stocks traded mixed on Wednesday after a weak earnings outlook weighed Wall Street amid falling treasuries with traders expecting a slower pace of Fed rate cuts.
Australia's S&P ASX 200 was 19 points, or 0.24%, higher at 8,225, while the Japanese Nikkei 225 was down 21 points, or 0.06%, at 38,384 as of 5:45 a.m. Futures contracts pointed at a positive start for stocks in Hong Kong and China.
US treasuries were in free fall and plunged the most since 1995, when Alan Greenspan, the erstwhile Federal Reserve chair, started cutting interest rates to engineer a soft landing. Two-year yields in the US have climbed 34 basis points since the Fed reduced rates on Sept. 18.
This comes as traders have been trimming the prospects of a larger rate cut in the next Fed meeting. According to Bloomberg, since the end of last week, traders have cut the extent of expected Fed cuts through September 2025 by more than 10 basis points.
The S&P 500 and Dow Jones Industrial Average slipped 0.05% and 0.02%, respectively, while the Nasdaq Composite advanced 0.18%.
Brent crude was trading 0.41% lower at $75.73 a barrel as of 6:00 a.m. IST. West Texas Intermediate was up 2.17% at $72.09.
Key Levels
US Dollar Index at 104.11
US 10-year bond yield at 4.21%.
Brent crude down 0.38% at $75.75 per barrel.
Bitcoin was down 0.54% at $67,133.13
Gold spot was down 0.14% at $2,745.27
Money Market
The Indian rupee hit a fresh closing record as it closed little changed against the US dollar on Tuesday on likely dollar selling by the Reserve Bank of India amid the continuous selling of domestic stocks by global funds.
The rupee closed flat at Rs 84.076 against the dollar, according to Bloomberg data. The domestic currency had closed at Rs 84.066 against the greenback on Monday.
