Week Ending November 1st 2024

Dear patrons, the festive mood across the country failed to enthuse Indian markets. The markets spent last week consolidating in a tight range of 24100-24500. Nifty failed to conquer 24500 in multiple attempts as predicted in the previous blog (you may read it here Weekly Market Update: Week Ending October 25th 2024) and closed the week around 24300.

World over markets have been quite buoyant, with the US markets scaling new heights on multiple occasions. European markets also edged higher over the week. Indian markets have on the other hand been consistently underperforming global peers for almost couple of months due onslaught of selling by the FIIs.

Outcome of US elections is likely to drive markets in coming weeks with no major economic activity by central banks. Geopolitical situation remains volatile and major impact on crude oil prices is visible.

Automotive companies declared auto sell numbers on the 1st and most of them were pretty encouraging. Rise in auto sells can be attributed to the festive season. GST collection for the month of October increased by 8.9% Y-O-Y indicating much better economic performance than anticipated. 

The recent decline in the small and mid-cap segment of the Indian stock market results from several key factors

1) Weak earnings: Many results announced until 31st October were flat or negative affecting investor sentiment compounded by aggressive FII selling throughout October 2024. 

2) SEBI's new collateral regulations: New rules have drastically reduced the stocks eligible for collateral, limiting leverage for traders and investors. 

3) Margin calls and forced liquidations: The lower leverage led to margin calls, forcing investors to liquidate positions and intensifying the sell-off. 

4) Impact on HNIs: High-Net-Worth Individuals, often leveraging their investments, faced challenges as many holdings became ineligible as collateral. 

5) Potential implications: Short-term volatility is likely as investors adjust to new regulations and process earnings impacts while corporate governance practices among small and mid-cap companies may come under scrutiny. 

6) Long-term opportunities: Despite short-term uncertainties, the Indian economy's long-term prospects remain positive with potential buying opportunities arising from the recent correction.

Let's take a look at charts and try to figure out future trend in the benchmark indices.

As we can see Nifty spend time consolidating above 24000 levels. Resistance for Nifty is placed around 24500. 24000-23800 should act as support for the coming week. Break below 24000 may lead to further downside towards 23200. Break above 24900 should propel the Nifty towards new highs in a jiffy. FIIs pulled out more than Rs. 1 lac crore from Indian markets resulting to almost 10% fall from recent highs. Retail Indian investors along with DIIs managed to counter this selling with almost equal buying. 

BankNifty remained more resilient for the past week. Move above 52400 may lead the BankNifty towards recent highs and further. 51000 remains very strong support for BankNifty whereas 52000-52100 should act as resistance. BankNifty may lead the next rally in the markets, taking Nifty in tandem. Some of the PSU banks are looking very attractive in the near term.

We are still bullish on the markets and anticipate reversal in the tide in favor of bulls sooner than later. Making money in the markets will become a tad difficult compared to last year. Rigorous study and adhering to a strict trading framework is the only counter to rising volatility in the markets.

P.S.: This communication is for educational purpose only and does not recommend buying or selling any stock or index. Trade at your own risk.