Nifty Futures Signal a Rocky Start for Indian Markets

The Indian stock market is bracing for a bumpy start on Monday. After a rough trading session last Friday, Nifty futures on the Gif Nifty plunged by 378 points, which is about 1.53%, landing at 24,337. This signals a negative opening for the week ahead, especially as traders are feeling the pressure from various negative cues both globally and locally.

Analysts suggest that a significant sell-off in Asia-Pacific markets, weak economic signals, and rising tensions in the Middle East are causing a stir in market sentiments. Concerns about potential outflows from foreign portfolio investors (FPI) and high valuations of Indian stocks are adding to the unease on Dalal Street.

Economic growth appears to be weakening, made worse by ongoing trade issues and high inflation rates. Notably, the Bank of Japan (BOJ) has already raised interest rates, which has affected Japanese markets, while the US Federal Reserve is reportedly considering a rate cut in September following disappointing job data, according to Vinod Nair from Geojit Financial Services.

Looking forward, analysts believe that the market is likely to consolidate further due to high valuations and disappointing results from the first quarter of June. The upcoming meeting of the Reserve Bank of India (RBI) next week might provide insight into future rate decisions, though the consensus seems to lean toward maintaining current rates.

On Friday, the BSE Sensex dropped by 885.60 points, or about 1.08%, landing at 80,981.95, while the NSE‘s Nifty50 fell by 293.20 points, or 1.17%, ending at 24,717.70. The volatility was also reflected in the midcap and smallcap indices, which faced their downturns too, and the fear gauge, India VIX, surged by over 11% to 14.32.

Global markets have been on the decline partly due to US Manufacturing PMI data showing contraction. Concerns about a slowing US economy have been amplified by rising jobless claims hitting an 11-month high, as noted by Siddhartha Khemka from Motilal Oswal Financial Services. Furthermore, disappointing earnings outlooks from major tech companies have also dampened sentiments in the market.

The Nifty50 index closed last Friday on a low note, dropping sharply from the important 25,000 mark. Analysts point to two primary issues: the absence of significant positive updates in corporate earnings and overly optimistic market conditions. While discussions of a possible double-rate cut from the Fed persist, bearish sentiments remain, compounded by weak jobs reports.

Technically speaking, the daily charts show a negative candle pattern forming, indicating a potential reversal after reaching a high of 25,078. This bearish trend leaves room for further decline, with critical support around the 24,600-24,500 levels, according to Nagaraj Shetti from HDFC Securities.

For those currently monitoring the Nifty, support is expected to hold around 24,600-24,500. Until the index drops below this range, there shouldn’t be too much worry, suggests Osho Krishan from Angel One. On the upside, resistance levels will be observed at 24,900 as the market continues to navigate these turbulent conditions.

Turning to the Nifty Bank, it has managed to stay above 51,000, which is seen as a positive sign, possibly pushing towards a target of 52,000. However, a drop below 51,000 could lead to further downsides, potentially testing levels around 50,500 or 50,200, according to Amol Athawale from Kotak Securities.

Overall, the Bank Nifty has demonstrated a tendency to consolidate and could face challenges ahead. The inside bar pattern suggests that key levels to watch out for in the coming sessions are between 52,550 and 50,440, as noted by Jatin Gedia from Sharekhan.