Nifty 4.5% above 50-DMA, downside marker at 18,150, Bank Nifty could move to 44,400; India VIX eyed

By Anand James

Five more states in quick succession going into polls late this year, in addition to general elections in 2024 had made Karnataka a battle ground, which markets had also had been following, given how it responded last week, despite US CPI returning weak numbers. An anti incumbency wave was already priced last week, which should cushion any volatility that may Monday would have to face, as it weighs the margin of victory.  

India VIX eyed

Eyes would be on VIX, as it had begun to rise from near record levels to the 13 vicinity, but it is not threatening yet, to accompany a collapse. We would closely watch its progress though, as any rise above VIX could be a signal towards a steep rise in volatility expectations. This is one of the reasons that will moderate the expectations of achieving the measured objective of 18,500 in Nifty. Yet another reason that clouds the prospects of upsides is the potential for mean reversion, given Nifty is 4.5% above the 50 DMA, an event last seen only in November 2022, post which Nifty corrected from the record peak. A collapse past 17,800 is certainly ruled out, with 18,195/150 service as the downside marker for now.

Earnings season provides stock specific opportunities

Earnings season is still on, meanwhile, providing a window for stock specific moves. Though around 64% of NSE Nifty 50 stocks have announced results, only about 39% of NSE Nifty 500 stocks have done so. That 60% of those have declared profits keeps the positivity of the month running, it will require more to launch further leaps.

Sectoral outlook

Sectorally, auto stocks shone the brightest, with auto index registering a 4.3% gain week on week,  and 61.5% auto stocks in the F&O segment witnessing long build up. Private banks were the second best gainers last week, and would play an important role next week; NSE Nifty Bank within touching distance of the record peak it last witnessed in 2022. While 44,000 vicinity would be a major moment sucker early in the week, Friday’s clean break above 43,700 lends support for a leap towards 44,400. Towards this end, we will go in next week penciling 43,700/43,600 region as pivotal for Bank Nifty.

(Anand James, Chief Market Strategist, Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)