The beginning of a fresh week is likely to be flattish for domestic equities. However, analysts expect the market to remain lacklustre with muted participation due to year-end holidays. Gift Nifty at 23,790 signals a flat opening for the Nifty as Nifty January futures on Friday closed at 23,793. Stock-specific action is likely due to a truncated trading week (December 25 is a closed holiday due to Christmas) and monthly F&O settlement this week.
However, according to analysts, the undertone is weak both fundamentally and technically. The focus has shifted to the US, where it is staring at a shutdown. Debt ceiling concerns are back in play as president-elect Trump denounced the deal reached earlier to avert a shutdown, said IFA Global Research. “Trump’s proposed spending bill that included a two-year suspension of the debt ceiling, failed to get past the house. If the bill is not passed, it could result in government shutdown,” it further said, adding that the government, with it’s existing cash balances can, however, carry on its operations for another 3-4 months, at least, after which it could potentially default. “A hawkish Fed and uncertainty around debt ceiling triggered risk aversion and flight to safety. Price action is likely to remain muted next week on account of the holiday season,” IFS Global added.
Foreign portfolio investors, after remaining buyers for a brief period, again turned into sell mode.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: The sudden change in FII strategy from buying to selling has impacted markets. In the early days of December FIIs were consistent buyers; they bought equity for ₹14,435 crores in the cash market till December 13. But they have turned into big sellers after that, he said. “For the week ended 20th December, FIIs have sold equity for Rs 15828 crores in the cash market, selling on all days. Rising dollar (dollar index above 108) and a steady rise in the US 10-year bond yields to 4.5% contributed to the FII selling. India-specific issues like slowing growth concerns and flat corporate earnings in Q2 also contributed to the FII selling. The strength of the US economy, good corporate earnings growth and strong dollar are factors favouring the US,” he added.
Signal from the F&O segment is also weak, said analysts.
According to Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities: Derivatives data reveal a bearish tilt, with significant call writing dominating the session. “The 24,000-strike call accumulated the highest open interest at 93.22 lakh contracts, highlighting it as a formidable resistance level. On the downside, the 23,000-strike put garnered 82.65 lakh contracts, marking a vital support zone. Heavy call writing between the 23,700–24,000 levels reinforce resistance, while diminishing put positions at lower strikes indicate fading bullish sentiment. The put-call ratio (PCR) edged up to 0.71 from 0.60, reflecting a bearish undertone. The “max pain” level at 24,000 suggests limited downside risks for the short term,” he added.
Meanwhile, most Asian stocks opened in the positive zone in early deals on Monday.
