The stock market is set to open on a positive note today, with the benchmark Sensex and Nifty indices expected to open marginally higher. The GIFT Nifty indicates a gain of 125 points for the broader index. However, investors are cautious as the recent market trends show signs of a possible trend reversal.
Market Recap
Yesterday, the BSE Sensex plunged 671 points to 71,355, while the Nifty 50 dropped 198 points to 21,513. The formation of a long bearish candlestick pattern on the daily charts suggests a potential trend reversal. The market’s reaction to a small rise indicates strong resistance levels around 21,750-21,800.
Technical Analysis
Nagaraj Shetti, senior technical research analyst at HDFC Securities, points out that while the positive chart pattern with higher tops and bottoms remains intact, the formation of a new lower top at 21,763 could be a concerning signal for bulls at higher levels. Immediate resistance is placed at 21,650, while the next lower support can be expected at 21,350.
Kunal Shah, senior technical and derivative analyst at LKP Securities, also highlights the change in market sentiment indicated by the chart pattern formation. He suggests that if the support level of 21,500 holds, a recovery towards the immediate hurdle zone at 21,650 is possible.
Volatility and Market Pressure
The volatility in the market has increased sharply, making the bulls uncomfortable. The India VIX, which measures market volatility, jumped 7.06 percent to 13.46. The broader markets also experienced pressure, with the Nifty Midcap 100 and Smallcap 100 indices falling by 1 percent and 0.6 percent, respectively.
Pivot Point Analysis
According to the pivot point calculator, the Nifty is likely to face immediate resistance at 21,538, followed by 21,758 and 21,861 levels. On the lower side, it can find support at 21,486, followed by 21,422 and 21,319 levels.
Global Market Trends
US Markets
US stock futures inched lower on Monday night after a strong trading session earlier in the day. The Dow Jones Industrial Average futures fell by 41 points, while the S&P 500 futures and Nasdaq 100 futures each dipped by nearly 0.1 percent. The previous session saw a rally in the S&P 500 and Nasdaq Composite, with mega-cap tech stocks bouncing back from the previous week’s declines.
European Markets
European markets turned positive on Monday, recovering from a negative start to the year. The Stoxx 600 index closed 0.34 percent higher, driven by gains in technology and retail stocks. However, oil and gas stocks dropped 1.55 percent due to price cuts announced by Saudi Arabia. The pan-European index ended the previous week 0.3 percent lower, with investors closely watching US inflation data and big bank earnings for further clues on the state of the economy.
Asian Markets
Asia-Pacific markets rebounded on Tuesday after a sell-off in the previous session. Japan’s Nikkei 225 gained 1.66 percent, while South Korea’s Kospi advanced by 0.7 percent. Australia’s S&P/ASX 200 climbed 1.03 percent, and the small-cap Kosdaq gained 0.91 percent. Investors are assessing December inflation numbers for Japan’s capital city of Tokyo and Australia’s retail sales for November 2023.
Indian Government Bonds in Bloomberg Indices
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Indian government bonds could receive a boost in 2024, as Bloomberg proposes their inclusion in its indices starting September 2024. This move aims to enhance the country’s position as a promising investment choice among emerging markets. The phased inclusion of Indian government bonds over five months will be completed in January 2025.
Merger Pact Between Zee-Sony May Be Called Off
Sony Group Corp. is planning to call off the merger pact with Zee Entertainment Enterprises Ltd., capping two years of drama and delay in creating a $10 billion media giant. The Japanese conglomerate intends to cancel the deal due to a standoff over the leadership of the merged entity. Sony no longer wants Zee’s CEO, Punit Goenka, to lead the company amid a regulatory probe. The termination notice is expected to be filed before the January 20 deadline for closing the deal.
Share Buyback by Bajaj Auto
Bajaj Auto Ltd has approved a Rs 4,000 crore share buyback at Rs 10,000 per share. This buyback, at a premium of 43 percent to the last closing price, will involve the purchase of 40 lakh shares via the tender route. The automaker aims to balance its clinker facilities in North India and boost capacity amid robust demand. The buyback is subject to shareholder approval through a special resolution.
Public Listing of Tata Autocomp Systems
The Tata Group has initiated talks for the public listing of Tata Autocomp Systems (TACO), its auto components manufacturing business. The discussions are at an early stage, focusing on divestment stakes and the overall quantum of stake that will be divested in the IPO. TACO is fully owned by Tata Group entities, with Tata Sons and Tata Industries holding significant stakes. The listing of TACO is expected to commence later this year.
India’s Weightage in MSCI EM Index
India’s weightage in the MSCI Emerging Markets index has surpassed Taiwan, securing the second position after China. This solidifies India’s position as an attractive investment choice among emerging markets. The MSCI Emerging Markets index has seen a significant spike in the past eight years, from 7 percent to 17.1 percent. With increasing domestic institutional investments and steady foreign institutional investor participation, India’s weightage in the MSCI EM Index could surpass 20 percent by early 2024.
Impact on India’s Exports due to Red Sea Threats
India’s total exports may see a hit of around $30 billion in the current fiscal year due to threats to cargo vessels in the Red Sea. The surge in container shipping rates and concerns over the safety of shipments have prompted exporters to hold back on shipments. The impact of the Red Sea crisis on Indian exports is yet to be officially estimated, but it could result in a contraction of around 6.7 percent based on the previous fiscal year’s total exports.
ACC’s Acquisition of Asian Concretes and Cements
ACC Limited, owned by Adani, will acquire the remaining 55 percent stake in Asian Concretes and Cements Private Limited (ACCPL) at an enterprise value of Rs 775 crore. This acquisition aims to boost ACC’s capacity amid robust demand. The deal will be fully funded through internal accruals and is expected to be completed soon.
Hyundai’s Investment in Tamil Nadu
Hyundai Motor India Ltd has announced an investment of Rs 6,180 crore in Tamil Nadu. This investment will be used for various initiatives, including the establishment of a hydrogen resource center. The automaker plans to deploy a total of Rs 20,000 crore over ten years to enhance its efforts in electric vehicle manufacturing, charging infrastructure, and skill development. The investment is part of Hyundai’s commitment to fortify the state’s socio-economic development.
Godrej Consumer Products’ Manufacturing Plant in Tamil Nadu
Godrej Consumer Products Limited (GCPL) has inaugurated its cutting-edge manufacturing plant in Tamil Nadu. This Rs 515-crore investment aims to enhance delivery times, optimize inventory management, and reduce overall costs. The facility, strategically located near Chennai, will focus on accelerating the production of flagship brands such as Cinthol, Godrej Expert Rich Crème, Godrej Selfie Shampoo Hair Colour, and Goodknight. GCPL aims to develop the facility as a “lighthouse factory” with a focus on sustainability, safety, and automation.
Oil Production by ONGC’s Deep-Water Project
Oil and Natural Gas Corporation (ONGC) has commenced oil production from its delayed flagship deep-sea project in the Krishna Godavari basin. This development marks a reversal of years of decline in output for the company. The Cluster-2 project in KG-DWN-98/2 block is expected to produce 45,000 barrels per day of oil and over 10 million standard cubic meters per day of gas.
Vistara’s Confidence in Receiving Boeing Order
Indian full-service carrier Vistara is confident that it will receive its last 787 wide-body jet from Boeing by March or April. Despite a recent mid-air blowout incident involving the Boeing 737 MAX 9, Vistara remains optimistic about the delivery. The incident has led to regulatory scrutiny, but Vistara believes it will not affect the delivery schedule.
Conclusion
As the stock market opens today, investors are cautiously optimistic about the positive start indicated by the GIFT Nifty. However, the recent bearish candlestick pattern and strong resistance levels raise concerns about a possible trend reversal. The global market trends and various developments in the Indian financial landscape, such as the inclusion of government bonds in Bloomberg indices and the potential cancellation of the Zee-Sony merger pact, further impact market sentiment. It will be interesting to see how these factors play out and influence the stock market’s performance throughout the day.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Always do your own research and consult with a qualified financial advisor before making any investment decisions.