The Indian stock market is poised for a robust opening on Wednesday, with benchmark indices Sensex and Nifty 50 likely to extend gains from the previous session. This optimistic outlook is primarily driven by the recently announced India-EU trade agreement, which has injected positive sentiment into domestic equities.
Global Market Influence and Domestic Performance
Asian markets displayed a mixed performance in early trading, while US stocks largely closed higher, with the S&P 500 achieving an intraday all-time high. This favorable global backdrop is expected to support Indian markets. The Gift Nifty, a key indicator, was trading around the 25,445 level, showing a premium of approximately 62 points over the previous close of Nifty futures. This suggests a strong opening for Indian indices.
On Tuesday, Sensex and Nifty 50 closed higher amid significant volatility. The Sensex rose by 319.78 points, or 0.39%, to finish at 81,857.48, while the Nifty 50 increased by 126.75 points, or 0.51%, concluding at 25,175.40. The gains were supported by strong purchases in the banking and metal sectors, favorable trends in global markets, and positive sentiment surrounding the India-EU Free Trade Agreement (FTA).
Challenges Limiting Gains
Despite the upward momentum, traders noted that slow corporate earnings growth and ongoing outflows of foreign capital from Indian equities capped the gains. These factors continue to pose challenges for sustained market rallies.
Market Outlook and Technical Analysis
According to Jay Thakkar, Vice President and Head of Derivatives and Quant Research at ICICI Securities, the Nifty 50 bounced back from previous swing support and managed to close above the 25,150 level, which is a positive sign in the near term. The bounce was well-supported by banking and financial stocks, which have higher weightage in the Nifty 50.
The Nifty metals index continued its upward move, gaining more than 3% in the last trading sessions. The PSU Bank Index and Nifty Metal Index maintained their upward trajectory without any signs of reversal. The India VIX opened with a gap-up of over 9%, reaching an intraday high of 16.06 before closing nearly flat at 14.22. It is expected to rise until the budget day, with a short-term base at 12. As long as it does not close below this level, further increases are anticipated.
Options Chain Insights
In the options chain, the 25,000 strike now holds the highest put base, while the 25,500 strike has the highest call base. This sets the range for the next weekly expiry between 25,500 and 25,000 levels. As long as the 24,900 level is held on a closing basis, there is room for short covering, which could lead to some recovery. However, volatility cannot be ruled out.
Stocks to Buy in the Near-Term
Jay Thakkar of ICICI Securities recommends the following stocks for near-term investment:
- Tata Steel February Futures: Buy in the range of ₹195-190 with a stop loss at ₹185 and targets at ₹205/210. Steel stocks within the Metal Index outperformed in the last trading session, with overall long rollover. Tata Steel has witnessed long buildup along with higher tops and bottoms, indicating a short-term uptrend. The stock has the highest call base at 190 and managed to close above it, suggesting potential call unwinding.
- Union Bank February Futures: Buy in the range of ₹175-177 with a stop loss at ₹170 and targets at ₹182/185. The stock has been consolidating for a few trading sessions, with a breakout likely in the February series due to overall long buildup over the past few months. The Nifty PSU Bank Index has been outperforming the overall market, which is a positive sign. Options data shows the highest call base at the 180 strike; if this is taken off, significant call unwinding is expected. Support levels at 175-173 provide a positive bias.
- Bharat Electronics Ltd (BEL) February Futures: Buy in the range of ₹415-420 with a stop loss at ₹398 and targets at ₹450/465. The stock has been consolidating between ₹370-425 for the past few months, with the lower end of the range shifting higher. It has not witnessed major long unwinding but has seen some long buildup, indicating upside potential. The highest call base at 420 suggests that above this level, significant call unwinding and an upside breakout are possible.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. Investors are strongly advised to consult certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
