The rollercoaster ride is expected to continue in the Indian stock market where global headwinds are causing pressure at higher levels amid supportive domestic cues.
World markets are trying to adjust with expectations of a sharp rise in interest rates in the US after record inflation but the elevating geopolitical tension is trying to make things worsen.
US markets witnessed sharp selling pressure in late trade of Friday's trading session after some news on the Russia-Ukraine standoff. This tension also led to a sharp rise in crude oil prices which is not good for emerging markets like India.
On the domestic front, we will have our inflation data while the tail-end of earning session will have an impact on some individual stocks.
On the political front, developments in the upcoming assembly polls Uttar Pradesh, Uttarakhand, Goa, Punjab, and Manipur will be closely watched.
The LIC IPO is a key talking point among market participants as it is going to be the biggest IPO in Indian market history. It is expected to hit the market soon and may bring at least 1 crore new demat accounts and that could be a big positive for the dynamics. This is because if 10 percent of these investors become active, then it will increase participation of retail investors and it will also help the government to generate revenue through STT.
Negative impact in secondary market
Apart from positive aspects, there could be some negative impact on the secondary market as it may suck out the liquidity from the secondary market.
The behavior of FIIs will also be an important factor because they are selling relentlessly. However, there was a minor buying figure on Friday due to some block deals. The interesting thing about the current market is that there is intense volatility but we didn't move anywhere since October despite more than 1.5 lakh crore selling by FIIs.
Long exposure of FIIs in index future jumped to 48 percent and the put-call ratio is sitting at 1.09 level--both are neutral for the market. If we look at the OI distribution chart, then it is scattered. Therefore we don't have any clear direction from the derivative data.
Nifty facing resistance at 100-DMA
Technically, Nifty is facing resistance at 100-DMA which is currently placed at 17,650 level. On the downside, 17,300 is immediate support below this, 17,000-16,800 is a critical demand zone and the buy-on dip texture will remain intact till Nifty trades above 16,800--that is 200-DMA.
Bank Nifty has a comparatively strong chart structure. However, it is facing resistance in the 39,000-39,500 zone. Above this, we can expect a fresh rally towards 40,200/41,000 levels. On the downside, 20-DMA of 38,200 and 100-DMA of 37,800 are immediate support levels while 37,000-36,500 is a critical demand zone.
(The writer is Head of Research, Swastika Investmart Ltd.)