Trade Setup For Oct. 4: Nifty 50 Set For More Downside As Support Drops To 25,000

Indian markets opened gap-down on Thursday, driven by weak global sentiment amid escalating geopolitical tensions and disappointing domestic data. Analysts expect NSE Nifty 50 to witness volatility in the near term, with 25,000 to act as a support level.

The market breached the important support of 20-day SMA, post which the selling pressure intensified, indicating continued weakness with 25,500 to act as immediate resistance. Hardik Metalia, derivative analyst at Choice Broking, added that a break below the support level could trigger further downside, while resistance at 25,500 may cap any short-term recovery attempts.

"A bearish candle on daily charts and correction continuation formation on intraday charts indicating further weakness from the current levels," said Shrikant Chouhan, head equity research, Kotak Securities. Chouhan also added that one quick technical pullback is likely if the market succeeds to trade above 22,365 levels.

In addition, the volatility index, India VIX, surged by 9.86% and settled at 13.17, indicating a rise in market volatility.

Bank Nifty also opened on a negative note and remained under pressure through the previous session. The index has formed a large red candle on the daily chart, indicating weakness, according to Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd. On the downside, support for Bank Nifty will be placed at 50,990, he added.

The GIFT Nifty, an early indicator of the Nifty 50 Index’s performance in India, was up 5 or 0.02% at 25,438.5 as of 06:33 a.m.

The Nifty October futures were down 1.89% to 25,475 at a premium of 25 points, with the open interest down by 8%.

The Nifty Bank October futures were down by 1.87% to 52,384 at a premium of 539 points, while its open interest was up by 25%.

The open interest distribution for the Nifty 50 Oct. 10 expiry series indicated most activity at 27,950 call strikes, with 23,100 put strikes having maximum open interest.

For the Bank Nifty options expiry on Oct. 9, the maximum call open interest was at 53,000 and the maximum put open interest was at 52,000.

Overseas investors experienced their highest single-day selling in 2024, while domestic institutional investors recorded peak buying as the NSE Nifty 50 and BSE Sensex fell, following the Securities and Exchange Board of India’s restrictions on futures trading and rising geopolitical tensions in the Middle East.

Foreign portfolio investors continued as net sellers for the fourth consecutive session, offloading stocks worth Rs 15,243.27 crore, according to provisional data from the National Stock Exchange. This marks the largest sell-off by foreign portfolio investors in 2024.

In contrast, domestic institutional investors remained net buyers for the eighth straight session, purchasing equities worth Rs 12,913.96 crore, the NSE data revealed. This represents the highest buying by domestic institutional investors in 2024.

The NSE Nifty 50 and BSE Sensex experienced their worst session since Aug. 5, following the Securities and Exchange Board's announcement of new restrictions on futures and options trading, which dampened investor risk appetite. Major players like Reliance Industries Ltd. and HDFC Bank Ltd. contributed to the decline in the Nifty 50 index.

The Nifty 50 closed down 546.80 points, or 2.12%, at 25,250.10, while the Sensex fell 1,769.19 points, or 2.10%, ending at 82,497.10.

• BSE: The weekly index derivatives contracts on Sensex 50 and Bankex are to be discontinued with effect from Nov. 14 and Nov. 18, respectively. This indicates that BSE will have only one tradeable index, which is Sensex. The announcement follows the new framework launched by the SEBI on Tuesday.

• Bajaj Housing Finance: The lender's assets under management surged 26% year-on-year and reached Rs 1.02 lakh crore, up from Rs 81,215 crore in the same quarter last year, according to provisional data. The company's loan assets stood at around Rs 89,860 crore at the end of the September quarter, reflecting a 26.6% increase from Rs 70,954 crore in the same period last year.

• Bajaj Finance: The NBFC's assets under management rose 29% to Rs 3.74 lakh crore in the quarter ended September, according to a provisional quarterly business update. It's loan book grew by 14% year-on-year to 9.69 million in the second quarter. The net liquidity surplus for the quarter stood at Rs 20,100 crore, while the company’s deposits book came at Rs 66,100 crore, a growth of 21% year-on-year.

Stocks in the Asia-Pacific region fluctuated in early trade on Friday after the conflict between Iran and Israel escalated, with US President Joe Biden weighing to support further Israeli strikes.

Japan's Nikkei 225 was 119.38 points or 0.31% higher at 38,671.44, while Australia's S&P ASX 200 was 90.90 points or 1.11% lower at 8,114.30 as of 06:25 a.m. During Thursday's session, Brent crude went up 5.03% to $77.62 a barrel.

Crude oil prices sored after President Joe Biden, told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities. “We’re discussing that. I think that would be a little, anyways,” Biden said.

Elsewhere, stocks in the US struggled to gain traction even though the latest data showed that the services sector in September expanded at the fastest pace since February 2023. The US September ISM services PMI rose to 54.9 versus the estimate of 51.7.

In another set of data, US unemployment benefits rose slightly last week. The weekly jobless claims rose by 6,000 to 2.25 lakh, which was above the Bloomberg estimate.

The S&P 500 and Nasdaq Composite slipped 0.17% and 0.04%, respectively. The Dow Jones Industrial Average declined by 0.44%.

The September US jobs report will be released on Friday, which will be crucial for the Federal Reserve's next rate cut direction. The unemployment rate is expected to hold steady at 4.2%, according to Bloomberg.

Traders will keep an eye out for the S&P Global PMI figures for Hong Kong, inflation in the Philippines, and retail sales in Singapore.

• US Dollar Index at 101.88

• US 10-year bond yield at 3.84%.

• Brent crude up 0.15% at $77.74 per barrel.

• Bitcoin was 0.31% down at $60,589.25

• Gold spot was up 0.02% at $2,656.43

The Indian rupee closed lower on Thursday, driven by increased demand for the US dollar amid escalating geopolitical tensions in the Middle East and a slowdown in the country’s manufacturing sector in September.

Foreign institutional investors, concerned by these developments, withdrew Rs 5,579 crore from Indian markets, exacerbating the rupee’s downtrend.

The Indian currency depreciated 15 paise to close at Rs 83.97 against the US dollar. It had closed at Rs 83.82 on Tuesday, according to Bloomberg data.