Profit taking is likely to continue at Dalal Street on Wednesday, despite the markets is being supported by the domestic and foreign institutions. As global markets are struggling, analysts expect the Indian peers to move in a narrow range with downward bias.

They stated that the trend of stock-specific gains, particularly in the mid and small-cap space, is expected to persist, while benchmarks stocks in the Nifty and Sensex may remain in consolidation mode

SGX Nifty flat, but positive

SGX Nifty at 18,344 indicates a marginal gain at open but analysts are skeptical about the continuation of the upward trend. This is due to the decline of US stocks overnight and the fact that most equities in the Asia Pacific region are also down in early trading on Wednesday.

The majority of US stocks are currently experiencing a decline as the market prepares for a prolonged debt-ceiling negotiations process. In addition, the upcoming inflation report is expected to reveal that the disinflation process is facing challenges. “No one is expecting any meaningful progress with President Biden’s meeting with congressional leaders. House Speaker McCarthy and President Biden will likely draw their red lines and try to signal a willingness to work with the other side,” said Edward Maya, Senior Market Analyst at The Americas, OANDA.

Key Q4 results

With crucial results such as L&T, Dr Reddy’s Lab coming out today, the focus will remain on result calendar, said analysts. Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said:

“Markets struggled for direction in a choppy and uninspiring session, as risk aversion was the preferred theme ahead of the US CPI numbers for April to be released on Wednesday.”

According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, apart from global cues and Q4 earnings, the domestic market will also watch for the Karnataka assembly election that will start on Wednesday. “The outcome of the election will be announced on May 13. While the Nifty is finding some profit booking at higher levels, the overall Market structure remains positive,” he added.

It was a range-bound trading session for the indices as the markets did not witness any significant move and the market breadth also was even-steven, said Ruchit Jain, Lead Analyst at 5Paisa.com. The near term trend continues to be positive as the important supports are intact, but the lower time frame charts are showing some negative divergence as the new highs in prices on the hourly charts have not been confirmed by RSI. Also, the Nifty index has surpassed last week’s high but the Bank Nifty index hasn’t, which is another divergence. Usually, such divergences post a rally gives early signs of a probable corrective phase.

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