India’s benchmark indices Sensex and Nifty opened higher on Friday amid a slump in global markets. The domestic market has fallen for a fifth straight day on worsening global sentiment and concerns over the election results. US stocks continued to fall, with the Dow dropping over 300 points on Thursday and the Nasdaq dropping over 1% or 183 points.
But ignoring U.S. market sentiment, stocks across the Asia-Pacific region got off to a strong start on Friday.
A new monthly series (August) is also being introduced on the NSE today.
The 30-stock BSE Sensex index rose 353.80 points to 74,239.40 at opening trade, while the NSE Nifty index rose 100.45 points to 22,589.10.
With the polling season over for Indian companies, the focus has shifted to the general elections, the final phase of which will be held on Saturday and the results will be announced on June 4. Exit polls through various channels will be released on Saturday evening, which will determine the market’s performance next week. However, analysts expect the market to remain weak on Friday as well. They warned that selling by foreign portfolio investors is likely to increase again, adding to concerns.
“The Nifty fell for the second consecutive day, dropping 216 points to close at 22,489. India VIX was flat at 24.19,” Ashwin Ramani, Derivatives & Technical Analyst, Samco Securities said.
“The long-short ratio (LSR) of foreign portfolio investors (FPIs) declined to 49.50 per cent on May 29 from 53.96 per cent on May 28 as they liquidated some of their existing long positions in index futures,” he added.
According to Nuvmaa Alternative & Quantitative Research, the Nifty futures rollover was 72%, higher than the 71% rolled in the previous three times.Nifty futures will commence the June series on a higher OI base of Rs 32,500 crore (Rs 1.44 crore) than the OI of Rs 28,000 crore (Rs 1.24 crore) seen at the start of the May series.
The market-wide futures open balance at the opening of the June contract was Rs 4.064 (record high), compared with Rs 3.945 at the opening of the May contract. The market-wide rollover was at 88 percent, below the three-month average of 89 percent, the report said.
“The May series was definitely exciting as the onset of general elections usually leads to excess volatility. During the May series, the Nifty index traded in the range of 1,300 points and hit an all-time high on May 27. However, as per the Nuvama rollover report, ahead of the election results on June 4, the market started booking profits amid a surge in India VIX.”
The put-call ratio (PCR), known as a sentiment indicator, fell to 0.52 at the close on Thursday, indicating call selling was dominating.Five trading days ago, the PCR hit a high of 1.34, Ramani said.
Call writers (bears) still have significant positions at the 22,500 strike and options trade at this strike will give a hint about the future direction of Nifty, he further said.
According to Shrikant Chauhan, Head of Equity Research at Kotak Securities, a sharp correction is currently underway and the market is trading close to the 20-day SMA (simple moving average). “We believe the market has completed one stage of correction and the 20-day SMA or 22,450/73,800 will now act as trend deciding levels for traders.”
He warned that short-term traders should be cautious and selective due to the risk of getting trapped at lower levels.
According to Nuvama, HNI/retail investors have taken bold long positions in indexes and SSFs (a record high of $19.4 billion), while FIIs have remained very cautious (SSF longs are hedged by index shorts, which are at an all-time high).
Nuvama expects the overall market to remain strong and for the index to trade within a range.
