Recession Fear Looms In US! When To BUY, When To Sell On Indian Stock Market From August 5-9?

Indian stock market is likely to face a sharp bearish blow in the opening bell of the trading session of Monday, August 5, as Asian cues grappled in a frenzy-selling. In the early trade, Gift Nifty plunged over 300 points, while the MSCI Asia Pacific index nosedived. Japan's benchmark has tumbled by around 7%. However, for the trading week from August 5th to 9th, the tone of stock market is seen to be side-ways with more leaning towards bearish stick.

Overnight, Wall Street struggled in the grip of bears with S&P 500, Dow Jones, and tech-heavy Nasdaq Composite index falling by 1.5% to 2.5%.

Investors are in hysteria as concerns over weakness in the US economy and volatile markets escalated, after the unemployment rate shot up to 4.3%, surpassing the Fed's target limit of 4.2%, which has dampened sentiments of a rate cut as early as September. With recession susceptibility back in the picture, it is expected that the Fed could keep rates at a two-decade high longer than hoped.

The probability of recession in the US has surged. Goldman Sachs continues to see recession risk limited in the United States as the economy continues to look fine overall. The leading banker also sees no major financial imbalances and further believes that US Federal Reserve has a lot of room for lowering key rates sooner as September or later in 2024.

However, Goldman's report has also raised the probability of recession in the US to 25% from earlier 15% in the next year.

Another reason for the Indian stock market to face the heat of bears would be that they're still overvalued compared to their other Asian counterparts.

Additionally, investors will be positioning their bets ahead of RBI policy outcomes scheduled later. The six-members MPC will commence its 3-days policy meeting on August 6, while its decisions will be announced on August 8. The majority of consensus is that RBI will keep rates unchanged while maintaining its stance.

For August 5th, Shiju Koothupalakkal - Technical Analyst at Prabhudas Lilladher expects Nifty to find support at 24,600, and resistance is seen around 24,900. Bank Nifty is likely to have support and resistance levels of 51,00 and 51,800 respectively.

Last week, on Friday, the Sensex dipped by 885.60 points or 1.08%, while the Nifty 50 shed 293.20 points or 1.17% to end at 24,717.70. Overall, the weekly performance of Sensex and Nifty was down by nearly a per cent.

When To BUY, When To SELL This Week In Experts Opinions!

Vinod Nair, Head of Research, Geojit Financial Services:

The Indian market is showing signs of fatigue at higher levels, as most positive factors have already been priced in. Subdued Q1FY25 earnings and stretched valuations are not reassuring investors. Sector-wise, metals have been affected by weak results and higher imports harming domestic industries. Capital goods and real estate have been impacted by profit-booking, while the auto sector has suffered due to below-expected monthly sales figures.

Globally, economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation. The BOJ has resorted to a rate hike, impacting the Japanese market while the US Fed is contemplating a rate cut in September due to weak jobs data. The RBI may also follow suit in the future, but the recent uptick in CPI inflation is a concern. China is experiencing a slowdown in growth, necessitating additional policy measures to restore its economic momentum.

Going forward, the chances of further consolidation seem elevated due to premium valuations, weak Q1 results, and ongoing global market consolidation. The RBI policy meeting next week could provide some hints towards an outlook on rates, while expectations are to maintain the status quo as of now.

Santosh Meena, Head of Research, Swastika Investmart:

This week, all focus will be on the global markets as we are seeing the first major signs of weakness after a long period of stability. This will test the strength of the Indian market, which has remained resilient due to strong domestic liquidity and a better macroeconomic outlook despite global headwinds and valuation concerns. Geopolitical tensions are also escalating, but markets are not reacting significantly, which is reflected in the declining crude oil prices.

On the domestic front, the upcoming RBI policy announcement on August 8th will be important, although it is likely to remain unchanged. The last batch of Q1 earnings will drive stock-specific movements. Additionally, institutional flows will play a crucial role in market dynamics.

On the technical charts, the 20-DMA of 24,600 serves as an immediate support level, while the 24,400-24,200 range forms a key demand zone. If the index falls below 24,200, there is a risk of significant profit booking in the market. On the upside, 25,000 remains a critical hurdle.

The Bank Nifty is struggling to cross its 20-DMA at the 52,000 level, while the 50-DMA at 51,000 is providing immediate support. The next support level is at 50,500; falling below this could signal further weakness. Conversely, a move above the 20-DMA could trigger substantial short-covering.

Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd:

The Nifty index has formed a negative candle, closing the week in the red, indicating a potential further downside move in the coming week after reaching a fresh all-time high. The next support level is at 24,500, and if this level breaks, we could move towards 24,200. On the resistance side, 24,900 is the immediate level to watch, and if the index moves above this, we could see a rise towards 25,200. The market structure appears weak, suggesting a "sell on rise" approach for Monday.

The Nifty Bank index has also formed a negative candle, ending in the red for four consecutive weeks. This consistent downward trend indicates pressure on heavyweight stocks. The support level is at 51,000, and if this is breached, we could see a decline towards 50,500. On the upside, resistance is at 51,600, and if surpassed, the index could move towards 52,000. Overall, the market sentiment remains weak with a sideways to the bearish outlook.

Alex Volkov, Market Analyst at VT Markets:

The upcoming CPI and PPI data will be critical in assessing the state of the Chinese economy. Continued weak inflation figures could lead to additional monetary policy easing by the PBOC to stimulate growth and counteract economic challenges.

The US ISM Services PMI's anticipated rebound will be closely monitored as a key indicator of the service sector's health and overall economic performance. A return to expansionary territory would alleviate some concerns about an economic slowdown.

Crude oil prices saw a slight decline of 0.43% this week, settling at $76.83 due to concerns about global economic growth affecting demand. In contrast, gold prices rose by 2.45% to $2445, supported by market expectations for potential Fed rate cuts, which are seen as a positive for precious metals.

The outlook for crude oil and gold will be influenced by global economic conditions and monetary policy expectations. Market sentiment and economic data releases will play a crucial role in driving future movements in these asset classes.

Ajit Mishra - SVP, Research, Religare Broking:

Currently, weak global cues are weighing on sentiment, which could lead to further declines. A potential retest of the short-term moving average, the 20 DEMA, in the Nifty, which is currently around the 24,550 level, is possible. A decisive break of this level could place bulls on the back foot, with the next support at the 24,200 level. On the higher side, 25,100 will continue to act as a strong resistance. While various key sectors have contributed to the recent surge, the performance of the banking index will be crucial for any significant recovery. We recommend continuing a stock-specific trading approach amid mixed signals, with a focus on overnight risk management.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.