Trade Setup For Monday; Key Factors To Know Before Market Open; 3 Stocks To Buy

Indian markets are likely to see a cautious start on Monday as global cues remain under pressure due to 10-year treasury yields rising over 5%. This week, markets will monitor Q2 FY24 earnings, festival-driven demand environment, US GDP data, and foreign funds flow. The rising bond yields, crude oil prices and surge in precious metals however will act as a spoilsport for equities as tension between Israel and Gaza heightened with possible ground invasion in the picture.

In the early trade, Gift Nifty traded in red. The index was in the range of 19,573 to 19,443.5 respectively. {image-
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However, markets could find some support after US Federal Reserve Jerome Powell hinted towards an extended pause in interest rates unless there are signs of stronger economic activity impacting the current progress. Powell on Friday said he was pleased with the latest decline in CPI inflation.

The sentiment in domestic equities is likely to be jittery with more profit-booking expected. The hurdle for Nifty 50 continues to be 19,800, however, the benchmark has the potential to slip between 19,300-19,500 levels.

On October 20th, the Sensex ended at 65,397.62, down by 231.62 points or 0.35%, while the Nifty 50 ended at 19,542.65, lower by 82.05 points or 0.42%. Bank Nifty also dipped by 31.45 points or 0.07% to settle at 43,723.05.

In the trading week that ended on October 20th, Sensex nosedived by 778.96 points or 1.18%, while Nifty 50 shed 177.30 points or 0.90%.

Talking about the last week's performance, Vinod Nair, Head of Research at Geojit Financial Services said, "The added uncertainty stemming from West Asia tensions and the imperative for continued monetary tightening emphasized by the US Fed Chair created a layer of volatility in the market. While heightened oil prices and elevated US bond yields will impact the domestic monetary environment and operational metrics of the companies. Furthermore, the varied results of blue-chip companies, influenced by subdued global & domestic demand, are steering the market towards a consolidation trajectory in the near term."

In global terms, Asian shares slipped tracking downside trends of Wall Street as gold and oil prices further advanced. On Friday, last week, the 10-year treasury yields crossed 5% sparking fresh concerns over the global economy's prospects ahead.

Dow Jones Industrial Average lost 286.89 points or 0.86%, while the S&P 500 index shed 53.84 points or 1.26%. The tech-heavy index took the worst hit by declining 202.37 points or 1.53%.

Day Trading Guide For Monday:

On October 23rd, Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher expects the Nifty Spot Index to have support between 19,400/19,350, while resistance is seen between 19,700/19,750. For Bank Nifty, Koothupalakkal sees the support level ranging from 43,400 to 43,350 and resisting around 44,000/44,050 levels.

Meanwhile, Amol Athawale, Vice President - Technical Research, at Kotak Securities said, that if international crude prices continue their upward trajectory, investors would turn jittery and more profit-taking could be seen in the domestic equity markets in the near to medium term.

Athawale added, technically, on daily and intraday charts, the Nifty formed a double top formation and reversed. Post reversal, the index is comfortably trading below the 20 and 50-day SMA ( Simple Moving Average ) which is largely negative. In addition, on weekly charts, it has formed a bearish candle which indicates continuation of weakness in the near future. As long as the index is trading below the 20 day SMA the weak sentiment is likely to continue. For traders, 19700 would be the immediate hurdle and below the same, the index could slip till 19450-19350. On the other side, above 19700 or 20 day SMA it could retest the level of 19800-19850. For Bank Nifty, as long as it is trading below 44500 or 50 day SMA the weak sentiment is likely to continue, below which, it could slip till 200 day SMA or 43200-43000. On the flip side, above 43900 a minor pullback rally is possible till 44300."

To investors, Ajit Mishra, SVP - Technical Research, Religare Broking, said, "Weak global cues combined with pressure in the key sectors are currently weighing on the sentiment and we don't expect relief anytime soon. Traders should align their positions accordingly and continue with a hedged approach."

On rising bond yields, Alok Agarwal, Portfolio Manager at Alchemy Capital Management said, "Rising rates are intuitively not positive for equity markets. With US Govt bonds giving 5% dollar returns, the ask rate for equities goes up significantly if one were to adjust for risk premium and currency hedging."

Agarwal added, "But India is in a special place. Finding another significant economy with a double-digit increase in corporate profits, double-digit nominal GDP growth, and double-digit ROEs is challenging. The force majeure continues. Higher rates imply that capital is not free or simple to obtain. However, in our view, it is never a barrier to something like what India provides, which is growth certainty. In summary, rising rates are not a sign of strong equity, but given its advantages, India is predicted to fare better."

Intraday Stocks To Buy On Monday:

Prabhudas Lilladher's technical analyst recommended buying three stocks during Monday's intraday trade. These are:

1. Colgate Palmolive: Buy at Rs 2110.75 with a stop loss of Rs 2070 for a target price of Rs 2200.

2. Berger Paints: Buy at Rs 584.25 with a stop loss of Rs 574 for a target price of Rs 617.

3. Torrent Power: Buy at Rs 735.40 with a stop loss of Rs 724 for a target price of Rs 780.

Nifty Spot Index:

Rupak De, Senior Technical analyst at LKP Securities said, "The benchmark Nifty recently experienced a significant decline, falling below the 50-day moving average (50DMA). The current trend appears to be negative, with immediate support situated at 19,500. A further decline below this level could potentially lead the index towards the range of 19,150 to 19,000. On the upside, the zone between 19,600 and 19,650 is expected to act as a strong resistance. A move above 19,650 could trigger short covering in the market."

Technically, Prashanth Tapse, Senior VP (Research), Mehta Equities said, Nifty could find support at the 19501 mark, while any uptick would be seen only if the index breaches its biggest hurdle at the 19887 mark.

Bank Nifty Spot Index:

Kunal Shah, Senior Technical and derivative analyst at LKP said, ""The Bank Nifty index has been locked in a persistent struggle between bullish and bearish forces, resulting in a period of consolidation that has extended for the past two days. The index is currently teetering at a crucial "make or break" point. The level of 43500 is regarded as decisive. A breach below the 43500 level is anticipated to trigger additional selling pressure in the market. On the other hand, if this level manages to hold on a closing basis, it could prompt a substantial short-covering rally. The potential target for such a move is around 44500, where there is a notable accumulation of open interest on the call side."

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.