Dalal Street Week Ahead: NOVEMBER 3RD Week | 2024 | P R Sundar

Summary

In this market analysis, PR Sund discusses the ongoing bearish trend in Nifty, driven by continuous foreign institutional investor (FII) selling and limited support from domestic institutions. He highlights the technical outlook, with Nifty trading between 23,000 and 24,000, and offers risk management strategies, including selling call options and buying long puts. Sund cautions against blindly trusting foreign brokerage reports and stresses the importance of observing FII behavior before making investment decisions. He also provides insights on hedging strategies, particularly for medium- to large-cap investors, emphasizing the need for caution amid market volatility.

Takeaways

• 😀 Nifty has been on a continuous decline for six trading sessions, breaking previous day's lows each time, indicating a bearish market structure.
• 📉 Out of the last seven weeks, six have seen declines, which is a rare occurrence in Indian market history.
• 💼 Foreign Institutional Investors (FIIs) have sold over 1.5 lakh crore INR since September expiry, contributing significantly to the market's downturn.
• 🏠 Domestic institutions have been buying despite FIIs selling, but there are concerns about how long they can continue this support as their cash reserves dwindle.
• ⚠️ If FIIs continue to sell and domestic institutions run out of cash, there may be no support to stop further market declines.
• 📊 Technically, resistance is at 23,800 to 24,000, while support is at 23,000, a key psychological level. A further drop could bring the next support at 22,000.
• 🧐 The speaker suggests that Nifty might give zero returns for the year based on current trends and market conditions.
• 🚫 The speaker advises against trusting reports from foreign brokerages, which could manipulate market sentiment for their own benefit (pump and dump).
• 📅 For the next eight trading sessions, Nifty is expected to trade between 23,000 and 24,000, influenced by external factors like political events and exit polls.
• 💡 A cautious approach involving options strategies such as buying put options and hedging with calls is recommended to manage the market's volatility.
• 💰 For larger capital investors, a strategy involving large-cap mutual funds combined with put options for hedging is suggested to limit potential losses while aiming for stable returns.

Q & A

What is the current trend in the Indian stock market as discussed in the video?

The Indian stock market, specifically the Nifty index, has been experiencing a continuous decline, with the Nifty falling in six out of the last seven weeks. There has been consistent selling pressure from foreign institutional investors (FII), which has contributed to the overall bearish sentiment.

What role have Foreign Institutional Investors (FIIs) played in the market decline?

FIIs have been selling heavily, with over 1.5 lakh crore sold since the September expiry. Despite their selling pressure reducing in recent sessions, the ongoing FII sell-off has been a key factor in the market's downturn.

How have Domestic Institutional Investors (DIIs) responded to the market situation?

DIIs have been buying despite the heavy selling from FIIs. However, there is concern that once their cash reserves are exhausted, they may no longer be able to support the market, which could lead to further declines if FIIs continue selling.

What is the potential danger for the market if FIIs continue to sell?

The potential danger is that if DIIs run out of cash and FIIs continue to sell without any support from local institutions, the market could experience a significant crash due to the lack of buying pressure.

What are the critical support and resistance levels for Nifty according to the analysis?

The major resistance level for Nifty is between 23,800 and 24,000, while the psychological support level is at 23,000. If Nifty breaks decisively below 23,000, there is a possibility that it could fall further to 22,000, which is seen as the next major support.

How did the US markets impact Nifty's movement?

The US markets fell due to comments from the Federal Reserve, which led to a negative sentiment that affected Nifty as well. This resulted in an expected 200-point gap-down opening for Nifty, reflecting the global market's influence on Indian stocks.

What trading strategy does the speaker suggest for managing risks in this volatile market?

The speaker suggests using options strategies to manage market risks. Specifically, selling call options and buying put options as a hedge. For instance, the speaker bought a 26,000 put option and sold a 24,000 put option to profit from further market declines, while managing the risk of potential reversals.

What is the significance of the Maharashtra state elections for the market?

The Maharashtra state elections, along with exit poll results, are expected to influence market sentiment. The market might react to these results, with the possibility of differing reactions between the exit polls and actual election outcomes, similar to past election cycles.

What does the speaker think about foreign brokerage reports on India?

The speaker advises caution when trusting reports from foreign brokerages, stating that some might engage in 'pump and dump' strategies—publishing positive reports to drive up prices before selling off their shares. The speaker emphasizes trusting one's own analysis over foreign institutional recommendations.

What is the expected trading range for Nifty over the next few weeks?

The speaker expects Nifty to trade within the range of 23,000 to 24,000 over the next eight trading sessions, as there are no major economic data releases expected. However, political events like the Maharashtra elections may introduce additional volatility.