As we approach the 2024 elections, the Nifty index is riding at an all-time high, reflecting robust investor confidence and strong market momentum. However, this bullish outlook is tempered by increased volatility and geopolitical tensions, notably between China and Taiwan. Here’s a closer look at the state of Nifty and the key events that will shape its direction in the coming weeks.
Key Indicators and Trends
Market Momentum:
- The Nifty has shown consistent upward movement, bolstered by strong corporate earnings and positive domestic macroeconomic data.
- Medium-term indicators remain positive, reinforcing the bullish sentiment despite short-term fluctuations.
Volatility:
- The India VIX index has surged above 21, indicating rising market volatility ahead of the election results on June 4. Traders should brace for potential market swings driven by political outcomes.
Short-Term Overbought Conditions:
- The hourly RSI shows that the market is currently overbought, suggesting the possibility of short-term corrections. Despite this, the medium-term trend supports continued market strength.
Geopolitical Tensions:
- Taiwan’s President Lai Ching-te has expressed a willingness to work towards mutual understanding and reconciliation with China amidst rising tensions. This geopolitical situation remains a critical factor for global market sentiment.
Major Upcoming Events
- Exit Polls and General Election Results:
- Date: Exit Polls around 1st June Evening and Election results on June 4 2024
- Impact: These results will be pivotal for market sentiment, providing insights into political stability and potential policy directions.
- Auto Sales Data:
- Date: June 1
- Impact: Reflects consumer demand and economic health, impacting auto sector stocks.
- India GDP Data:
- Date: May 31
- Impact: Expected to show economic growth, providing a gauge of recovery post-pandemic.
- US GDP Data:
- Date: May 29
- Impact: Influences global market sentiment and investment decisions.
- Manufacturing PMI:
- Date: June 1
- Impact: Reflects the economic health of the manufacturing sector, influencing overall economic activity.
Open Interest Analysis
The Nifty’s 6th June weekly expiry open interest data shows significant put writing at 22000, indicating strong support, and call writing at 23000 and 24000, indicating resistance levels. This suggests that while there is uncertainty, the long-term trend remains up.
Street Sentiment on FII Selling
Despite the markets reaching all-time highs, there is concern over persistent FII (Foreign Institutional Investors) selling. This trend could lead to increased market volatility and potential corrections. However, confidence is bolstered by strong domestic institutional buying and positive economic indicators.
Why FPIs are No Longer Considered Smart Money
Recent market behavior indicates that Foreign Portfolio Investors (FPIs) may no longer hold the title of “smart money” in the Indian markets. Despite previous bearish positions, FPIs have rapidly shifted their stance ahead of the Lok Sabha election results, significantly reducing their net short positions. This sudden change, driven by short-covering and substantial share purchases, contributed to the market reaching new highs.
Last Friday, FPIs cut their net short positions dramatically, reducing from 219,766 to 98,351 contracts in futures.
This short-covering, coupled with significant share purchases (₹4,670.95 crore), drove the market to new highs.
Conclusion
In summary, the Nifty is poised for an eventful week ahead of the 2024 elections. While the market momentum remains strong, increased volatility and geopolitical tensions require careful monitoring. Key economic data releases and political developments will play crucial roles in shaping the market’s direction. Traders and investors should stay informed and be prepared for potential market fluctuations as these events unfold.
