The Indian stock market appears set for a cautious start on Monday, October 21, 2024, amid mixed global cues and ongoing concerns over inflation and geopolitical tensions.
After a turbulent session on Tuesday, where the domestic indices ended with significant losses, market sentiment remains fragile.
Both the Sensex and Nifty 50 witnessed strong sell-offs, with the Sensex plummeting 930.55 points, or 1.15%, to close at 80,220.72, and the Nifty 50 dropping 309 points, or 1.25%, to end the day at 24,472.10.
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Gift Nifty and Global Cues
The trends on Gift Nifty, a Singapore Exchange-traded derivative of India’s Nifty 50, indicate a muted start for the benchmark index, trading at around 24,550—approximately 10 points higher than the Nifty futures’ previous close.
This slight premium suggests caution among traders, especially with weak global market cues and a lack of strong catalysts on the domestic front.
Global markets, particularly in the US and Europe, have been under pressure due to rising bond yields and fears of a prolonged high-interest-rate environment.
Coupled with geopolitical tensions in the Middle East, market participants are showing signs of risk aversion, which is expected to spill over into Indian markets at the opening bell on Monday.
Nifty 50 – Open Interest Data
The Nifty 50’s technical setup remains bearish, following its formation of a long bear candle on the daily charts on Tuesday. This candlestick pattern, along with a lower top formation around the 25,230 level, signals ongoing downside pressure.
Analysts are keeping a close eye on the 24,500 level, which is a crucial support area. A break below this could open the doors for a move towards 24,000—a level where significant put-side open interest (OI) is concentrated.
According to Nifty OI data, the highest OI on the call side is observed at the 24,600 and 24,700 strike prices, indicating strong resistance at these levels.
On the put side, significant OI is concentrated at the 24,400 and 24,300 strike prices, highlighting key support zones. This setup points to a range-bound market with a downward bias, as traders look to capitalize on short-term corrections.
Hardik Matalia, Derivative Analyst at Choice Broking, believes that with increased call writing at 24,500 and above, the downside momentum could persist unless the index manages to break through the 24,700 resistance.
Similarly, Praveen Dwarakanath, Vice President at Hedged.in, pointed out that short covering in ITM puts suggests continued downside pressure.
Nifty 50 Prediction
In the short term, analysts expect Nifty 50 to face stiff resistance at 24,700 and 24,840 levels. These levels should serve as opportunities for traders to reduce long positions and initiate short trades.
On the downside, the index could gradually drift toward 24,200, with the next major support seen at 23,940, according to Aditya Agarwal, Head of Derivatives & Technical Analysis at Sanctum Wealth.
From a technical perspective, the Nifty 50 has decisively broken below its 20-week moving average, which was positioned around the 24,718 level.
This signals weakening market sentiment, as pointed out by Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas. With both price action and momentum indicators pointing toward continued weakness, a “sell on rise” strategy could be appropriate in the coming sessions.
Bank Nifty Outlook
The Bank Nifty index also succumbed to heavy selling pressure on Tuesday, losing 705.55 points, or 1.36%, to close at 51,257.15.
Like the Nifty 50, Bank Nifty formed a long bearish candle on the daily chart, indicating continued weakness in the financial sector. Immediate support for Bank Nifty is pegged around the 51,000 and 50,800 levels, with resistance at 52,000 and 52,250.
Aditya Agarwal noted that while a pullback is possible from the 51,000 support level, profit booking is expected near the 52,000 resistance zone. Traders should be cautious as the index could face further downside if these levels are breached.
Praveen Dwarakanath added that options data for the Bank Nifty shows increased call writing above 51,500, signaling strong resistance before the monthly expiry.
A breakout on either side of the 51,000–52,000 range could provide a clear directional signal for traders, with significant movement expected once the index breaks out of this consolidation phase.
IT Index
The Nifty IT Index has been showing signs of deeper corrections, with a recent breakdown indicating further downside.
Traders are advised to adopt a cautious approach, selling on any rallies and booking profits at current levels. Key support for the IT index is seen at 40,050 and 39,100, with resistance at 42,400.
VLA Ambala, Co-Founder of Stock Market Today, mentioned that the IT Index’s bearish signals are likely to persist, given the recent price action and momentum indicators. Until a reversal is confirmed with a close above 42,400, traders should avoid taking fresh long positions and focus on profit booking.
Strategy for the Week
As the market enters the final week of October, traders are likely to maintain a cautious stance, especially with the Nifty 50 hovering around critical support levels.
The ongoing global uncertainties and weak domestic cues are expected to keep the market volatile, with a bias toward further downside in the short term.
The key levels to watch for the Nifty 50 remain 24,200 on the downside and 24,700 on the upside, while for Bank Nifty, the 51,000–52,000 range will dictate the next major move.
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SMJ provides the views and analysis expressed in this article and are for informational purposes only. They do not constitute investment advice. Readers are advised to consult with a certified financial advisor before making any investment decisions. SMJ is not responsible for any financial losses or damages incurred from actions taken based on the information provided.
