Indian Stock Market Overview by Epic Research
After five weeks of consecutive decline markets post a rebound from technically oversold levels and cooling off in global markets selling pressure. Nifty started the week on a reversal mode making a hammer pattern on the daily scale. We did see the market recovering from those levels. As the markets became much less volatile after a sharp sell-off buying was seen with long addition in 11100 - 11200 CE front along with liquidation in 10700 - 10800 strikes.
This was further stabilized as global markets rejoiced rebounded on the back of stronger Chinese exports data which was up 3.3%. This was soothing amid concerns over a global economic slowdown.
The fact that the market was able to sustain the lower levels were broadly dependent on two important factors that changed the Scenario. Firstly it was the Rate CUT by RBI which boosted the sentiments. A rate cut of 35 BPS was announced which was taken positively by the market. Secondly, it was a relief to hear that the government is going to have a discussion with FPIs and may consider to rollback higher taxes and LTCG on equity investment held for three years. These both factors worked well for the Indian equity market and improved sentiments.
Though how far this rebound can last is still a question since 11200 - 11300 is now a very crucial resistance and markets would need to close it. There are 20 Days MA which is now at 11230 and previous important swing points which are now working as resistances.
With Shortened week ahead, we also are now awaiting the Industrial production number which was 3.1% previously. Mfg Production was at 2.5%. Any steeper decline in these numbers will put pressure on recovery. Following that Inflation will also be released. So the volatility may continue to hurt while the trend overall is still bearish in the short term. It is important to see if this rebound can sustain domestic and global headwinds. We maintain a cautious stand on the rebound.