Stock Markets Set for a Rough Opening Amid Global Concerns

The equity markets are gearing up for a challenging opening today, with reports indicating a significant dip likely due to unsettling signs from global economies.

Concerns over a potential recession in the US have weighed on sentiments, especially following disappointing earnings reports from major tech companies. Additionally, the Japanese Yen’s recent surge is adding to the overall market unpredictability. Investors are also keeping a close eye on the ongoing tensions in the Israel-Iran situation.

This morning, GIFT Nifty futures are indicating that the Nifty 50 index could open over 300 points lower, standing around the 24,350 levels.

Last week, the NSE Nifty 50 broke its impressive eight-week winning streak with a slight 0.4 percent loss. Earlier in the week, it had managed to cross the 25,000-point mark for the first time, while the Sensex peaked over the 82,000 mark during intraday trading.

Looking ahead, analysts suggest that market consolidation is likely due to the prevailing gloomy mood globally. A key focus this week will be the Reserve Bank of India’s upcoming policy meeting on Thursday.

Vinod Nair, the Head of Research at Geojit Financial Services, mentioned that the high valuation, weak quarterly results, and shaky global markets could lead to further consolidation. He expects the RBI might maintain its current stance on interest rates.

On the global front, US markets experienced a tough end of the week, driven by alarming nonfarm payrolls data that fell short of expectations. Traders are now speculating that the Federal Reserve may implement rate cuts in the coming months, with possibilities of a 50 basis point cut in September.

On Friday, the NASDAQ dropped 2.4 percent to 16,776 while the S&P 500 and Dow Jones fell by 1.8 percent and 1.5 percent, respectively. Meanwhile, the yield on the US 10-year bond saw a drop to 3.74 percent, symbolizing investor caution.

As for commodities, gold futures are currently trading around the $2,470 level, and WTI crude oil has dipped to $73 per barrel.

In Asia today, Japan’s Nikkei index faced a massive drop of 7 percent, currently sitting at 33,370 points. The Nikkei has lost 14.7 percent in just three trading sessions after a surprising interest rate hike by the Bank of Japan.

In addition, the yen has appreciated by 10 percent against the US dollar in the past three weeks, raising concerns over possible further selling by foreign investors.

Other Asian markets also show negative trends with Taiwan falling 6.5 percent, Kospi losing 4.4 percent, and Straits Times dropping 3.2 percent. Additionally, the Hang Seng and Shanghai Composite are down by 1.6 percent and 0.9 percent, respectively.

Regarding trading strategies in Nifty for today, Osho Krishan, a senior analyst at Angel One, notes that while there have been minor market adjustments, caution is advised as the index remains strong above its major Exponential Moving Averages. Support is observed around the 24,600-24,500 range, with resistance identified in the 24,850-24,950 zone.

Hrishikesh Yedve from Asit C. Mehta Investment Intermediates noted that the Nifty’s recent price action indicates continuing weakness, suggesting that 25,080 and 82,130 could serve as significant resistance levels. On the downside, support is noted at 24,600.

Rupak De from LKP Securities added that the Nifty’s recent downtrend following the formation of a spinning top suggests that sellers may dominate until the index rises above 24,800, with possible targets around 24,530 or 24,400.

Transitioning to Bank Nifty, Hrishikesh Yedve advises keeping an eye on the consolidation within the range of 51,000-52,300, as a decisive breakout is awaited for a clearer directional move.

On the institutional trading front, foreign institutional investors (FIIs) net sold stocks worth Rs 3,310 crore, while domestic institutional investors (DIIs) were net buyers at Rs 2,965.94 crore.

In the derivatives market, FIIs net sold 21,170 contracts of index futures on August 2, contributing to a reduced long-short ratio, indicating a preference for cautious positions among foreign investors.

In the F&O space, eight stocks, including Aditya Birla Capital and Birlasoft, are under the trading ban today.

In the IPO arena, Ola Electric‘s IPO has seen 38 percent subscription on the first day, while Picture Post Studios and Afcom Holdings have surpassed expectations, being subscribed 6.2 times and four times, respectively. The subscriptions for Ciegall and Dhariwalcorp IPOs are still ongoing, with substantial demand noted.