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It was a second consecutive week of fall in the Indian equity market where Nifty and Sensex fell by around 2.5% and it was one of the worst week in 8 months. The sell-off can be attributed to relentless selling by FIIs where they have sold worth Rs15700 crore last week in the cash market while they sold around Rs. 25500 crore in October. FIIs are not selling in the Indian market because of any negative cues while recent strong outperformance by the Indian market is leading to mean reversion where recently Morgan Stanley and Numora downgraded Indian Markets to equal weight as a tactical shift.

Next week is going to be a truncated week on account of Diwali where the market is heading this festival season with a mood of profit booking. The week will start with auto sales numbers for October month where expectations are low while the market will also gauge the consumers' sentiments on Dhanteras and Diwali.

We will have important earnings lined up next week including names like HDFC, IRCTC, Tata Motors, Bharti Airtel, HPCL, Sun Pharma, Eicher Motors, SBI etc. Earning season so far remained mixed where most of the companies beat expectations on the revenue front but one clear trend is emerging is margin pressure due to rising input cost.

Globally, the outcome of the US Fed meeting on 3rd November will be the most important cue where it will be important to see how Fed will react amid rising inflation and slow-down in growth momentum. Rising Covid cases globally is another concern for the market.

Technically, Nifty has slipped below its 20-DMA and near term texture has changed to 'Sell on the rise' from 'Buy on the dip' where 50-DMA is immediate support which is currently placed at 17565 level while 17450-17250 will be the next critical support zone where we can expect the market to bounce-back. On the upside, the 18000-18200 area has become a strong supply zone and the short-term view will remain bearish till Nifty trades below this zone.

If we talk about Bank Nifty then it is also showing signs of topping out near the 41500 level however it manages to close above 20-DMA which is currently placed at 39000 level. On the downside, 38500-38000 is a critical support zone; below this, it is vulnerable for the more downside. On the upside, 40000 will act as an immediate and strong hurdle while 40500/41000 will be the next hurdles.

Santosh Meena is head of research at Swastika Investmart Ltd.

 

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