–
Foreign Institutional Investors (FIIs) continued to offload their holdings in the Indian market, with October 2024 sales reaching Rs 58,394 crore — the highest since June 2022 — even before the month was halfway through. In just one week, FIIs sold shares worth Rs 27,674.99 crore.
The sell-off extended beyond the cash market, with FIIs also reducing their positions in the derivatives market. SEBI’s recent restrictions on the options market have increased anxiety among traders, fearing a liquidity crunch.
This selling pressure was reflected in the performance of frontline indices, with the Sensex falling 0.37 percent and the Nifty50 declining by 0.20 percent. However, broader markets showed resilience as the small-cap and mid-cap indices gained around 1 percent each.
Due to relentless selling by FIIs and the surge in oil prices, the Indian rupee breached the 84-mark against the dollar for the first time, hitting a record low of 84.0975 per dollar. Brent crude prices have soared from around $69 per barrel on September 30 to $78.92, driven by concerns over a potential Israeli attack on Iran and a ground offensive in Lebanon.
While the Indian markets faced pressure throughout the week, the US markets continued to rally. The S&P 500 Index, Dow Jones Industrial Average, and S&P MidCap 400 Index hit record highs as the earnings season kicked off. Better-than-expected earnings from JP Morgan Chase and Wells Fargo boosted market sentiment. Although Alphabet, Google’s parent company, faced pressure following reports of a potential breakup, NVIDIA’s strong performance helped cushion the impact.
While the equity markets touched new highs, these gains may be masking concerns over rising inflation, which could delay further interest rate cuts this year.
In Europe, markets also closed in positive territory, with the STOXX 600 rising 0.66 percent on hopes that the European Central Bank (ECB) could expedite rate cuts. Italy’s FTSE MIB surged 2.13 percent, Germany’s DAX gained 1.32 percent, and France’s CAC 40 added 0.48 percent. However, the UK’s FTSE closed 0.33 percent lower.
Meanwhile, data from Germany paints a grim picture of the economy. The Federal Ministry for Economic Affairs and Climate Action forecasts a 0.2 percent contraction this year, indicating the possibility of two consecutive years of economic shrinkage.
Story continues below Advertisement
Meanwhile, the UK economy showed signs of recovery in August, expanding by 0.2 percent after stagnating in the previous two months. This growth, though modest, indicates resilience amidst challenging global conditions.
Asian markets were marked by volatility, with Japan’s Nikkei 225 closing the week 2.45 percent higher, driven largely by the continued weakening of the Yen. The Japanese currency was trading at its lowest level since August, at 148 Yen per Dollar, which boosted the export-heavy Nikkei index.
However, the real focus was on China, where markets struggled as optimism around Beijing’s anticipated stimulus package faded due to a lack of clarity. The Shanghai Composite fell 3.56 percent while the Hang Seng tumbled 6.53 percent. According to Bloomberg, economists expect the Chinese government to unveil a stimulus package of 2 trillion yuan, but uncertainty has kept investors on edge.
Over-sold readings
In a sharp two-week correction, Nifty has returned to its 20-week moving average, providing strong support across various indices. Notably, the Midcap, Smallcap, and Nifty 500 indices ended the week in positive territory, offering some relief and suggesting that the selling pressure might be subsiding. While Nifty’s recovery has been modest, sentiment indicators signal an oversold market, indicating the potential for a rebound in the coming days.
The 9-day moving average of the Put/Call Ratio (PCR) is a reliable short-term indicator, though it typically lags behind market highs and lows by a few days. The yellow highlights on the chart demonstrate how previous market bottoms often coincide with the PCR indicator reaching its lower range. After Nifty forms a bottom, the PCR typically follows suit a few days later, confirming the potential for a bullish reversal. Currently, we find ourselves at a similar point, where the PCR is at the lower end of its range, suggesting that the market is poised for an upward move.
9-day PCR
Source: web.strike.money
The average swing has started to recover after touching 14 on the daily chart. Now, at 34, it is far from overbought, leaving a lot of room for the upside. Readings below 20 are oversold, and below 10 are extremely oversold. The average swing checks how many stocks are showing positive momentum from the basket of stocks that trade in F&O. It uses the 9-EMA (exponential moving average) of the momentum to make this judgement.
Average Swing
Source: web.strike.money
Recently, the number of stocks generating buy signals based on the RMI (Relative Momentum Index) indicator dropped to just 16. When such a small number of stocks trigger buy signals, it typically reflects a short-term extreme bearish market condition. The theory is that the market tends to recover from oversold levels. This seems to be what is unfolding now, as the RMI indicator is gradually rising in tandem with the market, signalling a potential recovery under way.
Stocks above 50 DMA
Source: web.strike.money
Sector Rotation
The Weekly Relative Rotation Graph (RRG) from India Charts shows that Nifty Metal continues to see an increase in relative momentum, while Nifty PSE has fallen into the lagging quadrant, and PSU banks have weakened further.
Weekly RRG
Source: web.strike.money
Daily RRG
Sectorally speaking, it was a mixed week for the markets. Nifty IT, Pharma, and Healthcare continued to show positive relative momentum and relative strength, with the latter entering the leading quadrant. On the other hand, Nifty Realty, Banks, FMCG, and Financial Services weakened further and are now in the lagging quadrant.
Nifty Metal can be seen cooling off in momentum but is still highest on the relative strength ratio and continues to be in the leading quadrant.
Daily RRG
Source: web.strike.money
Stocks to watch
Among the stocks expected to perform better during the week are Coforge, Trent, Naukri, Bosch, Indian Hotel, Tech Mahindra, Polycab, Metropolis, Motherson, Infosys, Persistent Systems and HDFC AMC.
Among the stocks that can witness further weakness are Vodafone Idea, IDFC First, Shree Cement, and IndusInd Bank.