Nifty faces resistance at higher levels, broader trend remains negative

Domestic markets are expected to open flat on Wednesday as analysts remain cautious despite positive global cues. Asian stocks are ruling higher in the region of 0.3 per cent to 1.6 per cent as the US Federal Reserve maintained the rate steady as expected. However, Gift Nifty is ruling marginally at 19,130 against the Nifty futures close of 19,158, as analysts are analysing El Niño effect and Q2 results. The continuous selling by FPIs keeps participants on the edge, said analysts.

According to them, Q2 results so far have been mixed.

Core output slips

Meanwhile, the eight core industries’ output growth eased to a 4-month low of 8.1 per cent in September 2023, lower than August’s 14-month high of 12.1 per cent. The government has now revised the August 2023 print to 12.5 per cent. The latest reading is also lower than the 8.3 per cent growth recorded in September last year. Except for crude oil, which contracted 0.4 per cent, all the other seven industries recorded positive growth in September 2023.

Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd on Core, said:  A pick-up in rainfall expectedly flattened the core sector expansion in September 2023 to a four-month low of 8.1 per cent from 12.5 per cent in August 2023, amid the slowdown in growth of seven of the eight constituent sectors barring fertiliser output.

“While coal output expanded by double-digits for the third consecutive month in September 2023, steel production and electricity generation posted a robust growth of ~9-10 per cent in the month. The YoY growth in cement production decelerated sharply to six-month low of 4.7 per cent in September 2023, while crude oil production reverted to a contraction after a gap of two months.”

The IIP growth is likely to moderate to high single digits in September 2023, taking a cue from the core sector’s trajectory, she added.

Fiscal deficit

The Government of India’s fiscal deficit rose to Rs. 7 lakh crore or 39 per cent of the FY2024 BE in H1 FY2024 from Rs. 6.2 lakh crore in H1 FY2023, amidst an upfronting of tax devolution (to Rs. 4.6 lakh crore from Rs. 3.8 lakh crore). While net tax revenues rose by 15%, non-tax revenues expanded by 50% on the back of the RBI dividend amidst a 10% growth in revenue expenditure and a significant 43% YoY expansion in capex.

Domestic markets to remain volatile due to lack of clear triggers, said analysts.

Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities, said: the Future Open Interest (OI) indicated buildup of fresh short positions in Index futures. The India VIX, known as the fear indicator, rose 2.9% on Intraday basis to 11.83, gave discomfort to the bulls.

“Heavy call writing was observed at 19,200 & 19,300 Strike, which led to a strong down move in Nifty on Tuesday. The level of 19,060 acted as a strong support for the Index on Intraday basis. The maximum call open interest (OI) for Nifty is placed at 19,000 Strike and a break below the same can lead to continuation of the short-term bearish trend. The option activity at 19,100 Strike will provide cues about Nifty Intraday direction today,” he added.

Kunal Shah, Senior Technical & Derivative analyst at LKP Securities, said: “The Nifty index faced a challenge after a gap-up opening, encountering strong resistance at higher levels and failing to surpass the day’s high. Currently, the index is trading within a wide range bound by 18,900 and 19,250, and a breakout in either direction is likely to trigger trending moves. The broader trend remains negative, and only a close above 19,300 would signal a resumption of the uptrend.”

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