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Today's Trading Setup: Market in Holding Pattern Ahead of US Federal Reserve Policy Decisions
Synopsis:- In today's market analysis, we delve into the flat performance of domestic markets, which are currently in a consolidation phase following election results. With no new triggers, both local and global investors are focused on the upcoming US CPI data and Federal Reserve policy decisions. The GIFT Nifty indicates a negative start, while technical analysis highlights critical resistance levels that may hinder new highs. Additionally, we cover global market movements, forex updates, and slight increases in oil prices. Investors should monitor potential market shifts influenced by institutional activities and currency performance.
MARKETSINDIA
By Sameer Malhotra
6/12/20243 min read
Domestic Market Performance
The domestic markets ended flat on Tuesday, reflecting a consolidation phase due to the absence of fresh triggers. This stability followed a strong recovery in the aftermath of recent election results. Analysts have observed that the market is currently in a holding pattern, waiting for new developments to drive momentum.
Global Market Influences
Globally, investors are exercising caution as they await the release of crucial US Consumer Price Index (CPI) data and the US Federal Reserve’s policy decisions, which are due tomorrow. The commentary from the US Federal Reserve is expected to provide direction to the market. Currently, market participants anticipate one interest rate cut by the end of the year, and any deviation from this expectation could significantly influence market movements, according to Siddhartha Khemka, Head of Retail Research at Motilal Oswal.
Pre-Market Actions
GIFT Nifty (Formerly SGX Nifty) Outlook
The GIFT Nifty signals a negative start for the trading session, with Nifty futures trading 46 points lower at 23,308.
Technical View
The Nifty index is positioned at a critical resistance level between 23,400 and 23,500, which includes the 1.382% Fibonacci projection. This area is also marked by a weekly hanging man pattern and an opening downside gap from June 4th, posing significant resistance to the market’s ability to sustain new all-time highs. According to Nagaraj Shetti of HDFC Securities, there is potential for a market dip, with immediate support identified at the 23,050 level.
India VIX
The India VIX, an indicator of market volatility and investor fear, declined by 9.96%, settling at 14.76, suggesting a reduction in market anxiety.
Global Market Snapshot
S&P 500 futures: Little changed as of 9:01 a.m. Tokyo time
Hang Seng futures: Fell by 0.5%
Japan’s Topix: Declined by 0.7%
Australia’s S&P/ASX 200: Dropped by 0.2%
Euro Stoxx 50 futures: Decreased by 0.9%
Nasdaq 100 futures: Remained largely unchanged
Forex Market Updates
Euro: Stable at $1.0739
Japanese yen: Unchanged at 157.13 per dollar
Offshore yuan: Held steady at 7.2728 per dollar
Australian dollar: Unchanged at $0.6606
Commodity Markets
Oil Prices
Oil prices saw a slight increase on Wednesday due to optimistic global demand projections from the U.S. Energy Information Administration and OPEC. Brent crude futures rose by 11 cents (0.1%) to $82.04 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 18 cents (0.2%) to settle at $78.10.
Stocks Under F&O Ban
The following stocks are currently in the ban period under the Futures & Options (F&O) segment as they have crossed 95% of the market-wide position limit:
1. Zee Entertainment Enterprises (ZEE)
2. Balrampur Chini Mills
3. SAIL
4. India Cements
5. GMR Infrastructure
6. Hindustan Copper
Institutional Activity
Foreign Institutional Investors (FII) and Domestic Institutional Investors (DII)
Foreign portfolio investors turned into marginal net sellers, offloading shares worth Rs 111 crore on Tuesday. In contrast, domestic institutional investors purchased shares amounting to Rs 3,193 crore. The net short position of FIIs decreased from Rs 1.43 lakh crore on Monday to Rs 1.25 lakh crore on Tuesday.
Currency Market
Rupee Performance
The rupee weakened by 9 paise, closing at 83.59 against the US dollar on Tuesday. This decline was influenced by a muted trend in domestic equities and the strengthening of the US dollar in international markets.
In Conclusion, Today’s trading session is set against a backdrop of cautious global sentiment and technical resistance levels in the domestic market. Investors are advised to stay alert to any significant announcements from the US Federal Reserve, which could provide crucial direction for the markets. The consolidation phase observed in the domestic markets suggests a period of potential volatility, with immediate support levels offering some insight into potential market movements.