Ahead of Market: 12 things that will decide stock action on Monday

After a volatile week, benchmark equity indices fell sharply on Friday as many heavyweight constituents, including those in the IT and banking space saw heavy selling pressure.

With domestic traders and FIIs persistently locking in profits whenever prices show strength, analysts said that the best strategy would be to avoid aggressive positions while focusing attention on select stocks based on their fundamentals.

Here’s how analysts read the pulse of the current market.

“We would rather reassess the situation in the first half of the forthcoming week and all eyes on crucial levels like 16000 on the lower side and 16400 on the upside. The pragmatic strategy would be to stay light on positions and stock specific also; we are seeing a lot of whipsaws on either side,” Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One Ltd said.

Terming the trading experience of the last couple of weeks a “nightmare”, Chavan said that a recovery in coming days would be crucially contingent on US markets showing strength.

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“The benchmark appears to be moving towards the support zone between 15,900 and 16,100. Despite the fact that this week’s trading patterns suggest additional downside, the overall bearish momentum has moderated as Nifty is currently trading above the falling resistance line,” Yesha Shah, Head of Equity Research, Samco Securities said.

As long as Nifty does not fall below 15,900, there is a significant chance that the index can test 16,800 levels, Shah said.

That said, here’s a look at what some key indicators are suggesting for Monday’s action:

US shares

Global equity markets slumped and the dollar strengthened on Friday after a bigger-than-expected U.S. inflation spike in May raised concerns the Federal Reserve may tighten policy for too long and cause a sharp slowdown. On Wall Street, the Dow Jones Industrial Average fell 2.73%, the S&P 500 lost 2.91% and the Nasdaq Composite dropped 3.52%. The three indices posted their biggest weekly declines since January, tumbling roughly 5% each.

European shares

European shares slumped 2.7% on Friday after U.S. inflation came in hotter than expected, raising the prospect of a recession as central banks try to put a lid on prices. Losses on the pan-European STOXX 600 index were broad-based, led by a 4.8% slide in banks. STOXX 600 index fell 2.69% and MSCI’s gauge of global equity markets shed 2.79%. Italy’s MIB index sank 5.2% to three-month lows. Spain’s IBEX gave up 3.7%, while other major bourses in the region lost more than 2% each.

Tech View: Bearish candle

In the week gone by, the NSE Nifty50 index fell for four of the five trading days, ending the week 2.3 per cent lower. In the process, the index Nifty on the weekly chart formed a negative reversal candle on the downside. Formation of a long bear candle on the weekly chart signals a larger lower top reversal pattern at the swing high of 16,793 levels, said analysts.

F&O: Support at 16,000

On the call side, a large concentration of open interest is at 16500, meaning this is a resistance levels. On the put side, open interest converges around 16,000, providing support.

Stocks showing bullish bias

Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade setup on the counters of

, , Dr Reddy’s, Divis Labs, and .

The MACD is known for signaling trend reversals in traded securities or indices. When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Stocks signalling weakness ahead

The MACD showed bearish signs on the counters of Indian Bank, SRF, GR

, Jyothy Labs, NHPC, and . Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms

(Rs 2288 crore), (Rs 1227 crore), HDFC (Rs 984 crore), Bajaj Finance (Rs 729 crore), Tata Steel (Rs 972 crore), and Infosys (Rs 966 crore) were among the most active stocks on NSE in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Most active stocks in volume terms

(Shares traded: 7 crore), Ltd (Shares traded: 5 crore), (Shares traded: 4 crore), YES Bank(Shares traded: 4 crore), Zomato (Shares traded: 4 crore) and JP Power (Shares traded: 3 crore) were among the most traded stocks in the session on NSE.

Stocks showing buying interest:

witnessed strong buying interest from market participants as the stock scaled fresh 52-week highs, signalling bullish sentiment.

Stocks seeing selling pressure

AGS Transcation Technologies, Akash Infraprojects Ltd,

, , Grasim, and Hikal Ltd witnessed strong selling pressure and hit 52-week lows, signaling bearish sentiment on the counters.

Sentiment meter favours bears

Overall, market breadth favoured losers as 1,221 stocks ended in the black while 2101 names settled with cuts.


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