Indian markets failed to sustain the top with weak guidance from global equities due to poor string of economic data. The Indian headline NIFTY index saw sharp cuts on Friday ahead of crucial Non-Farm payroll data from the US. The NIFTY index settled at 24852, down over 1.17% or 292 points on Friday. The most anticipated non-farm payroll from the US for the month of August showed 142k jobs addition with unemployment rate reading at 4.2%. The data represents a gloomy picture of the US jobs market along with manufacturing recession continues. Following the data, US Dow jones industrial average index slide 400 points or 1% while technology driven index Nasdaq slide 2.55% or 436 points.
The Indian headline index expected to open lower on Monday following a selloff in US equities. The overnight market of Friday showed GIFT NIFTY futures at 24773, suggesting at least 70 plus point gap down on Monday. The broader NIFTY 500 index which cover over 90% of NSE’s market gap showed negative breadth On Friday with 391 declines and 110 advances. In sectoral indices, Bank NIFTY which has been a dragger for the market since few weeks, slide over 1.74% or 896 points. NIFTY IT, representing Indian Big tech companies showed profit taking and lost almost 0.97% on Friday. Following the NASDAQ slide on Friday, Indian IT may see further profit booking on Monday. Almost all sectors seen slides on Friday while the least was Pharma and Metals with both indices slide around 0.5%.
The most crucial thing ahead is how the Indian market behaves going forward. The bank has a weak link for the headline index and failed to sustain every small pullback. Auto segment has been moderate performer with strong gain in some two-wheeler stocks last week ahead of festive demand. FMCG stocks were also adding gains since few days expect Friday, due to improved monsoon and possibility of recovery of rural demand. IT has been performing with possible deep rate cuts from the US, reducing cost of funds globally. In fact, IT has been a major contributor for the rally recently which helped the NIFTY index to recover from around 23900 to reach ATH of 25333. Further profit taking in IT stocks may cause trouble to Indian headline index, however banks may possibly try a rescue considering inverse relation with IT since few months. The NIFTY index as closed below 20 days EMA suggests weakness and may take strong support around 50 days EMA pegged around 24480-530 range. The price action of NIFTY showed false breakout at top with theoretically 24000 is getting exposed. Despite that, the 50 Days EMA should work as interim strong support for nifty index and may provide pullback.
In sector specific for picking stocks for swing trading , one should consider the factor of Indian festive demand. Auto stocks such as Bajaj Auto, Hero Motors should be a buy on dips. FMCG stocks such as ITC again is a buy on dips as defensive play. IT sector is also a buy on dips with a possible 50 bp rate cut from the US Fed. Forget to tell you, some financial services stock such as Bajaj Finserv is also a buy on dips ahead of festive demand. Banks should be avoided for swing trading as long as clarity do not emerge.
For more updates, keep reading our regular reports regularly. With the recent Financial scams in Assam, many have seen exiting SIP plans with lack of proper knowledge. India have a growth story and if you are a long-term investor please do not take hasty decision and speak to your financial advisor.
The report is being prepared by Bitupan Majumdar, an independent SEBI registered research analyst with registration code INH30006962. Please consult your financial advisor before taking investment decision.
