Ahead of Market: 10 things that will decide stock action on Tuesday

Estimated read time 22 min read
Indian benchmark equity indices, Sensex and Nifty50, logged record closing highs for a second straight session on Friday, driven by state-run companies and energy stocks on hopes of continued capital expenditure spending by the new government.

The NSE Nifty 50 settled 0.29% higher at 23,465, while the S&P BSE Sensex added 0.24% at 76,993, with both benchmarks also recording their second-straight weekly gain. The Nifty 50 and Sensex gained 0.75% and 0.39%, respectively, last week.

Here’s how analysts foresee the market pulse:

“Nifty remained within the defined range of 23,300-23,500. The short-term sentiment is likely to remain more or less positive. Support levels are seen at 23,400/23,300, where put writers have built significant positions. A decisive fall below these levels might shift the market balance in favour of the bears. Until then, it’s a buy-on-dips market. On the higher end, a decisive move above 23,500 might lead to a sharp upside in the near term,” said Rupak De of LKP Securities.

Jatin Gedia of Sharekhan, said, “On the daily charts, we can observe that Nifty has been consolidating in the broad range of 23,200 – 23,500. The more it consolidates around this level the more likelihood of a breakout in the coming week. It has already been five days and we believe that a trending move is likely to unfold. The hourly momentum indicator has triggered a positive crossover from the equilibrium line suggesting that the consolidation has matured and can resume the next leg of upmove.”

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

US market:

Wall Street’s major indices saw slight declines on Monday amid anticipation of new economic data and upcoming remarks from Federal Reserve officials. Nvidia, a leader in AI chips, rose 1% to reach a new peak, boosting other chip stocks and propelling the Philadelphia SE Semiconductor index to record levels. Broadcom and U.S.-listed Taiwan Semiconductor Manufacturing Co each gained about 3%, with Micron Technology jumping 2% following brokerage firms’ upward revisions of its price targets. Technology led gains among the S&P 500’s 11 sectors. The Dow was the sole major index to dip for the week, while the Nasdaq achieved its fifth consecutive record close. Last week, the S&P 500 hit multiple all-time highs.

Goldman Sachs increased its 2024 year-end target for the S&P 500 to 5,600 from 5,200, implying roughly a 3.2% increase from current levels.

Market attention also focused on forthcoming statements from Fed officials John Williams, Patrick Harker, and Lisa Cook. Data indicated the New York Fed’s Empire State Current Business Conditions index and prices paid both saw modest declines, slightly below forecasts.

European shares:

European markets exhibited a mixed performance on Monday amidst renewed negative sentiment, with focus shifting to the upcoming interest rate decision by the Bank of England. Expectations are widespread that the Bank will maintain rates at 5.25%, although a majority of economists polled by StuffsEarth anticipate a cut in August. Meanwhile, anticipation builds ahead of the July 4 UK elections.

Across Europe, traders are monitoring a series of key events including the release of US retail sales data, inflation figures, and various central bank rate decisions throughout the week. In France, concerns mount over the upcoming elections following President Emmanuel Macron’s snap decision to call for them after his party’s setback to the far-right National Rally in recent EU-wide elections. This move has raised concerns about potential economic instability and the prospect of a standoff with the EU in the event of extremist electoral gains.

In the Asia-Pacific region, markets showed mixed results as investors evaluated crucial economic data from China. US markets opened flat for a holiday-shortened week, setting the tone for global trading sentiment.

Tech View: Long-legged Doji-type candle

Nifty ended Friday’s session with a gain of 67 points to form a long-legged Doji-type candle pattern, hinting at chances of a trend reversal next week.

Nifty continued to show range-bound action within 23,300-23,500 levels and still there is no early signs of any breakouts on either side. A decisive move above 23,500 levels is likely to open an upside breakout and a slide below 23,300 levels could mean a chance of downside breakout of the range movement in the near term, said Nagaraj Shetti of HDFC Securities.

Strong put writing was observed at 23,300 and 23,400 in Nifty. All eyes will be on 23,500 strike in the upcoming week. Call writers have sizeable positions at 23,500 strike and the option activity at this strike will provide cues about Nifty’s upcoming direction, chartists say.

Stocks showing bullish bias:

Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade on the counters of Mazagon Dock Shipbuilders, SKF India, Timken India, LIC, GRSE, and Honeywell Automation among others.

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 signaling weakness ahead

The MACD showed bearish signs on the counters of Aurobindo Pharma, Britannia, Adani Wilmar, Grand Pharma, Ratnamani Metal, and Dr Lal PathLabs among others. Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms

Mazagon Dock Shipbuilders (Rs 5,161 crore), HAL (Rs 3,285 crore), Cochin Shipyard (Rs 2,519 crore), BEML (Rs 2,240 crore), BEL (Rs 2,070 crore), HDFC Bank (Rs 2,033 crore), and GRSE (Rs 1,922 crore) among others 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

Vodafone Idea (Shares traded: 11 crore), HFCL (Shares traded: 10 crore), Shree Renuka Sugars (Shares traded: 9.6 crore), GMR Infra (Shares traded: 9.2 crore), YES Bank (Shares traded: 8.5 crore), Suzlon Energy (Shares traded: 8.5 crore), and IRB Infra (Shares traded: 7.2 crore) among others were among the most traded stocks in the session on NSE.

Stocks showing buying interest

Shares of Mazagon Dock Shipbuilders, Chemplast Sanmar, SKF India, JK Paper, KEC International, ABB India, and Poly Medicure among others witnessed strong buying interest from market participants as they scaled their fresh 52-week highs, signaling bullish sentiment.

Stocks seeing selling pressure

No major stocks hit their 52-week lows on Friday.

Sentiment meter favours bulls

Overall, market breadth favoured bulls as 2,179 stocks ended in the green, while 1,695 names settled in the red.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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