Trade Setup Thursday: Key Factors To Drive Stock Market Today; RBI Policy Meer In Focus

Indian markets are likely to pull back from their record-high levels on Thursday due to consolidation in global cues. In the early trade, Gift Nifty traded lower, while Asian stocks performed with the Japanese Nikkei dragging the most. These will be tracking US markets which continued to record another day of consolidation, while energy stocks dampened and pushed the benchmark WTI crude prices to near 1-year lows.

In the previous session, Sensex ended at 69,653.73, up by 357.59 points or 0.52%, while Nifty 50 closed at 20,937.70 higher by 82.60 or 0.4%. Both benchmarks have hit a lifetime high of 69,744.62 and 20,961.95 respectively. {image-stocks73-1701916426.jpg www.goodreturns.in}

On the latest performance, Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Impressive winning streak continued for the 7th straight session as the street is now anticipating a strong popular mandate for the BJP in the upcoming 2024 Lok Sabha polls. Also, falling crude oil prices and hopes that the US Federal Reserve will initiate rate cuts in the coming year boosted investors' confidence."

Meanwhile, Vinod Nair, Head of Research at Geojit Financial Services said, "Post-state elections, market optimism thrives, confirming policy continuity and meeting investor expectations. A robust FII reversal is fuelled by receding inflation and dropping yields in both US and Indian markets. The allure of Indian market gains post-China credit rating downgrade and decline in oil prices was followed by ease in geopolitical tensions."

Nair also added, "A strong rebound in IT, driven by reduced US recession risks and in anticipation of robust summer demand, fuels the momentum in the power sector. Despite a promising outlook, short-term profit booking may occur due to domestic premium valuation concerns. Further, lingering El Nino risks, a drop in reservoir levels, and reduced sowing may hold RBI to profoundly upgrade H2FY24 growth and reduce future inflation estimates."

RBI policy's second-day meeting will take place on Thursday ahead of the rates decision on Friday. Siddhartha Khemka, Head - of Retail Research, Motilal Oswal Financial Services said, "With RBI two day meeting commencing today investors will focus on the governor's commentary and clue for a rate cut. Thus, rate-sensitive sectors will remain in focus. Markets saw a smart rally of ~11% since the low of October end. Despite this sharp up-move, Nifty is trading at a 12-month forward P/E ratio of 18.4x, which is at a 9% discount vs. its long-period average (LPA). Hence, we expect the focus to shift towards the large-cap stocks."

To investors, Ajit Mishra, SVP - Technical Research, Religare Broking said, "Noticeable traction in the key sectors is fuelling momentum in the index however we can't ignore the possibility of some consolidation now. Traders should maintain their focus on stock selection as we are seeing a catch-up move in the sectors and stocks that were on the sidelines in recent months. Also, avoid contrarian bets in anticipation of a major decline."

For Nifty 50, Rupak De, Senior Technical analyst at LKP Securities said, "The index formed a hanging man pattern on the daily chart, suggesting the possibility of a bearish reversal. The bearish formation around the crucial resistance of 21,000 amplifies the bearish sentiment. The support lies at 20,850, below which the market may witness a healthy correction in the short term. On the other hand, a move above 21,000 might trigger a resumption of the bullish trend."

Meanwhile, on Bank Nifty's performance on Thursday, Kunal Shah, Senior Technical and derivative analyst at LKP Securities said, "The index experienced profit booking at higher levels in anticipation of the upcoming key RBI policy event. Despite this, the overall market sentiment remains bullish. It is advisable to adopt a buy-on-dip strategy, maintaining a positive outlook as long as the index sustains above the critical level of 46400. The immediate hurdle is positioned at 47250, and a successful breach beyond this level is anticipated to pave the way for further upside momentum towards the 48000 level."

In the case of stocks to invest on December 7th, Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher has suggested buying in three stocks. These are:

- BUY MIDHANI at 395 stoploss 389 Target 414

- BUY OLECTRA GREEN at 1211 stoploss 1195 Target 1280

- BUY INDIAN BANK at 419 stop loss 413 Target 445

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.