With fresh US-China trade concerns and a steep decline in global markets weighing on morale, the GIFT Nifty predicts a cautious start for Dalal Street.
Taking cues from poor global trends, Indian benchmark indexes Sensex and Nifty are expected to start the week on a subdued tone on October 13, after two weeks of gains. The cautious tone follows a steep selloff on Wall Street after US President Donald Trump’s proposal of a 100 percent tax on Chinese products, which he subsequently lowered over the weekend.
Dalal Street had a muted start as GIFT Nifty futures were trading at around 25,325 at 7:35 am, down 76 points or 0.3 percent.
The Nifty 50 index had its greatest weekly performance in more than three months last week, up 1.6 percent. Additionally, the index saw its fifth weekly rise in the previous six weeks, reaching a new weekly high of 25,330. But now, Monday’s session is probably going to put these gains to the test.
Citing China’s recent “hostile” actions and new restrictions on the transfer of vital software, Trump said on Friday that the US will apply an extra 100 percent tax on Chinese goods beginning November 1. The statement shook investors throughout the world, causing US markets to plummet: the Dow Jones plunged 1%, the S&P 500 sank 0.8%, and the Nasdaq Composite fell over 2%.
However, when Trump promised that trade ties with China “would all be OK,” confidence improved later as US futures recovered from the selloff. S&P 500 and Nasdaq-100 futures increased 1 percent and 1.2 percent, respectively, while Dow Jones futures increased 358 points, or 0.8 percent.
Nevertheless, as the US and China increased trade restrictions and leveled more charges over the weekend, Asian markets began down this morning. China hinted that tensions would rise higher when it said it was “not fearful” of a trade war with the US.
China’s CSI 300 lost 2.73 percent, while Hong Kong’s Hang Seng index sank 2.22 percent. The S&P/ASX 200 in Australia had a 0.68 percent decline. The small-cap Kosdaq index fell 2.24 percent, while South Korea’s Kospi fell 2.35 percent. For a holiday, Japan’s marketplaces were closed.
Levels of technical
Expected resistance for the Nifty’s next phase of upward momentum would be between 25,400 and 25,450 levels. Although Friday’s steep pullback in US markets may have affected mood, analysts think it is unlikely to alter the overall upward trend as long as the Nifty remains above important moving averages and the Bollinger Bands’ midline.
The band of 25,000 to 24,900 is where the index finds support. According to market observers, a decline below this level may favor the bears.
According to Choice Broking’s derivatives analyst Hardik Matalia, the Nifty showed significant bullish momentum last week, climbing 391 points and creating a bullish candle, which was its second straight week of gains. Support is positioned at 25,150 and then 25,000, while immediate resistance is seen at 25,500, followed by 25,600 and 25,850. According to him, a collapse below 24,900 may lead to further downward pressure.
Cues from F&O
With 1.25 lakh contracts, the 26,000 strike has the most call open interest in the weekly options data, indicating that it may serve as a significant short-term resistance level for the Nifty. The 25,650, 25,350, and 25,450 strikes, which added 32.41 lakh contracts, also saw heavy call writing.
The 25,200 strike is a critical support level on the put side since it has the greatest open interest of 1.37 crore contracts. Following the 25,250 and 25,200 strikes, the 25,300 strike saw the most Put writing, adding 86.14 lakh contracts.
On October 10, the Nifty Put-Call Ratio (PCR), which gauges market mood, increased from 1.06 to 1.32, suggesting a modest positive tilt.