Analysts turn bearish on Nifty ahead of F&O expiry

Market


Indian stocks markets gave up early gains to end lower today, dragged down by last hour selloff. The blue-chip NSE Nifty 50 index ended 0.5% lower at 17,415.05, while the benchmark S&P BSE over 300 points to 58,340 as losses in auto, IT and consumer stocks outweighed gains in the energy and banking sectors.

Jittery global markets also dented sentiment on reports that Germany may announce tougher Covid restrictions amid spike in cases. Investors have been focusing on rising COVID-19 cases in Europe, weaker economic sentiment in Germany and inflation concerns.

“The news of the COVID situation worsening globally has started weighing on the sentiment along with the inflation fear. And since there’s no major event on the domestic front, markets will continue to take cues from global counterparts. At the same time, the scheduled monthly expiry would keep the traders busy on Thursday. We suggest continuing with negative bias on the index while keeping a check on leveraged positions. Nifty has next major support around 17,150 zone,” said Ajit Mishra, VP – Research, Religare Broking Ltd

Among auto stocks Eicher Motors and Maruti Suzuki fell over 2% each while the Nifty IT index fell 1.52%, led by losses in Infosys Ltd, Larsen and Toubro Infotech. 

State-run Oil and Natural Gas Corporation was the top gainer on the energy sub-index, rising 4.26%. Digital payments start-up Paytm rose 17.2%, climbing for a second day on Wednesday.

“Indian equity markets opened positive and remained range bound for most part of the session before plunging towards the last hour on account of weak global cues and profit booking. Going ahead, the markets are likely to continue with consolidation given weak global cues, persistent FII selling and premium valuation. In the absence of any fresh trigger and subdued sentiments, investors would await for the fundamentals to catch up with valuations. Market could take direction from the US economic data. It would also track the Covid situation in Europe which could impact the global economic activities. Monthly F&O expiry tomorrow could add to the volatility,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd..

Technically, the short term trend of Nifty continues to be down and there is no confirmation of any significant bottom reversal at the lows, says Nagaraj Shetti, Technical Research Analyst, HDFC Securities. “There is a possibility of further weakness towards 17200 levels in the short term, before showing another round of minor upside bounce from the lows.”

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said: “While Nifty failed to surpass the 17600 resistance level, the index has formed a bearish candle along with a lower top formation. Ahead of the monthly F&O November series expiry the market is likely to trade within the range of 17340 to 17520. Below 17340, the uptrend would be vulnerable.”

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