Market heading towards Diwali with a profit-booking vibe

It was a second week in a row of falling in the Indian stock market where Nifty and Sensex fell around 2.5% and it was one of the worst weeks in 8 months. The sale can be attributed to the relentless sales of the FIIs where they sold for a value of Rs15,700 crore last week in the spot market as they sold around Rs. 25,500 crore in October. FIIs are not selling in the Indian market due to negative indices, while the recent strong outperformance of the Indian market is causing a reversion to the mean, where recently Morgan Stanley and Numora lowered the Indian markets to equal weight as tactical change.

Next week is going to be a truncated week because of Diwali where the market is heading this festival season with a profit booking vibe. The week will begin with auto sales figures for October where expectations are low while the market will also assess consumer sentiment on Dhanteras and Diwali.

We will have big profits next week including names like HDFC, IRCTC, Tata Motors, Bharti Airtel, HPCL, Sun Pharma, Eicher Motors, SBI, etc. but a clear trend is emerging: pressure on margins due to rising input costs.

Overall, the outcome of the US Fed’s November 3 meeting will be the most important signal where it will be important to see how the Fed reacts to rising inflation and slowing growth momentum. Another concern for the market is the increase in Covid cases around the world.

Technically, Nifty has slipped below its 20-DMA and the near-term texture has shifted to “Sell Up” from “Buy Down”, where 50-DMA is immediate support which is currently placed at the 17565 level. while 17450-17250 will be the next critical support area where we can expect the market to rebound. On the upside, the 18000-18200 area has become a strong supply area and the short term view will remain bearish until Nifty trades below this area.

If we talk about Bank Nifty, it is also showing signs of capping near the 41500 level, but it manages to close above 20-DMA which is currently placed at the 39000 level. In contrast, 38500-38000 is a support area. critical; below it is vulnerable for the most downside. On the upside, 40,000 will act as an immediate and strong hurdle while 40500/41000 will be the next hurdles.

Santosh Meena is Research Manager at Swastika Investmart Ltd.

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