Indian Stock Market Outlook and levels for NSE Nifty
Despite ending the final trading week with gains, the Nifty 50 index snapped a three-week winning streak. Currently, the index is relatively unchanged on a year-to-date basis, just slightly above the level of 18,197.
This week marks the conclusion of the May F&O series, in which the Nifty 50 has recorded a gain of more than 150 points so far. The last time the Nifty 50 achieved consecutive gains in F&O series was back in October and November 2022.
Although the Nifty 50 saw gains on Friday, the put-call ratio, a sentiment indicator, dropped below 1 for the first time in a month. A put-call ratio above 1 suggests bearish sentiment in the market, while a ratio below 1 indicates the opposite.
Currently, the Nifty 50 faces a significant resistance barrier between the levels of 18,300 and 18,400, while it continues to find support between 18,050 and 18,000, as evidenced by Friday's low of 18,060. Analysts suggest that if the Nifty 50 bounces off the 23.6 percent retracement zone, the uptrend may resume. The next support level is at 18,000, where significant put writing has been observed.
Global cues will also impact the market, with US equities ending lower on Friday due to stalled debt ceiling talks. Asian markets have opened with little change, and Singapore (SGX) Nifty futures indicate a subdued start to the new trading week in India.
Domestic cues, such as the withdrawal of Rs 2,000 currency notes from circulation, are also expected to influence the market. Prabhudas Lilladher anticipates a rally in banking stocks as banks would deposit funds with the Reserve Bank of India at an SDF rate of 6.25 percent, and the rally in treasuries would benefit the banks' investment portfolios.
The Nifty Bank index managed to hold the crucial support level of 43,500, suggesting that the bulls are still in control. The next resistance level for the index is at 44,000, and a break above it could trigger a swift move towards 44,500.
Technical analysis by Nagaraj Shetti of HDFC Securities indicates the formation of a bullish hammer pattern on the Nifty 50's charts, signaling a possible reversal to the upside. However, a decisive move above 18,450 is desired to negate any bearish effects.
In terms of investor activity, foreign investors were sellers on Friday, while domestic institutional investors (DIIs) had a buying figure in the cash market. Sixty-six percent of Nifty 50 stocks are currently trading above their 200-Day Moving Average, slightly lower than the previous two-week average of 69 percent, according to Abhilash Pagaria of Nuvama Alternative and Quantitative Research.