Stock Market Outlook (May 6): GIFT Nifty Signals Weak Start — Will Dalal Street Extend Losses Today?

The Indian stock market closed Tuesday’s session in the red, and early signs point to another weak start on May 6 with mixed global cues and domestic sentiment turning cautious.

Banking, financial and heavyweight stocks fell, weighing on the market. The BSE Sensex fell 251.61 points, or 0.33 per cent, to settle at 77,017.79. The Nifty 50 ended at 24,032.80, down 86.50 points or 0.36%.

GIFT Nifty opens with a gap down

Derivatives markets are the first indicators, and they suggest continued pressure on Dalal Street. The GIFT Nifty was down 95.2 points at 24,032.80, indicating a negative start for the benchmark indices in the Wednesday trade session.

Asian markets mixed; Japan closed for a holiday

There are Asian clues all over the place. Tokyo’s stock exchange is closed for the Golden Week holiday, with the Nikkei having closed the previous session up 0.38%.

Elsewhere:

Kospi jumps 5.41% to 7,312.54
Kosdaq fell 0.73% to close at 1,204.87.

The divergence shows uneven regional sentiment.

US markets higher overnight

Wall Street gave positive signals with major indices ending higher:

Dow Jones up 356.35 points (0.73%) at 49,298.25
The S&P 500 rose 58.47 points, or 0.81%, to 7,259.22
The Nasdaq Composite rose 258.32 points (1.03%) to 25,326.12

However, the positive US close has not fully carried through to Asian strength, keeping Indian markets cautious.

What caused Tuesday’s market drop?

The selling pressure was broad-based in the Nifty 50, with the banking and heavyweight stocks bearing the brunt. The largest decliners included:

ICICI Bank (-1.57 %)
Coal India -1.48%
Jio Financial (-1.48%):
Tech Mahindra (-1.39%)
Axis Bank (-1.36%)

Dr Reddy’s, JSW Steel and Eternal added to the pressure.

Positive side: The following selective buying was seen:

Mahindra & Mahindra (+3.68%).
UltraTech Cement (+1.54 per cent)
Hindalco (+1.37%).
Bajaj Finserv (+1.16%)
HDFC Life +1.13%

Market breadth was still poor, with 16 stocks advancing and 34 declining.

Nifty 50 Technical View

The index was range bound as follows:

Open: 24,052.60
23882.05 Low
High 24,081.70
Close: 24,032.80

The index has corrected some after a recent upmove. RSI is still around 50, suggesting neutral momentum.

Key levels to watch:

Support: 23843 / 23725
Resistance: 24,223 / 24,340

Bank Nifty Under Pressure

Selling continued in major banking stocks, as Bank Nifty dropped 331.45 points, or 0.60%, to 54,547.05.

The worst performers were:

ICICI Bank (-1.57)
Axis Bank (-1.36%)
IDFC First Bank (-1.08%)
HDFC Bank (-0.80%)
SBI (-0.79%)

Support provided was limited to the following:

Yes Bank (+3.06%)
Federal Bank (+0.81 per cent)
Union Bank (+0.08 per cent)

Despite a mild recovery, the index remained weak in the entire session.

Technical indicators:

The RSI is moving towards 40, showing momentum is weakening
Support: 53,784 / 53,311
Resistance: 55,310/55,783
Sensex trend & financials

The Nifty Financial Services index declined 97.50 points or 0.38% to 25,716.90, with banking stocks leading the negative bias.

Meanwhile, the Sensex also showed weakness, driven by the following factors:

ICICI Bank (-1.53%)
Eternal (-1.37 %)
Tech Mahindra (-1.28%)
Axis Bank (-1.20%)
Bharti Airtel (-1.08)

Support from buyers included the following:

Mahindra & Mahindra (+3.41%)
UltraTech Cement (+1.58%):
Bajaj Finserv (+1.08 %)
Bajaj Finance +0.87%
Infosys (+0.80%)

Market outlook: What to watch today?

Despite supportive global cues, weak domestic sentiment and pressure on banking stocks are weighing on indices, and markets are likely to remain range-bound with a negative bias.

Investors are likely to remain stock-specific and look for opportunities while tracking global cues, movement in crude oil and institutional flows.

Traders will be looking for stability after recent profit booking, and the near-term direction will be decided by the support levels, especially in Nifty and Bank Nifty.

Also Read: Stocks To Watch Today, May 6: Hero MotoCorp, Coforge, Mahindra And Mahindra In Focus After Strong Q4 Earnings

(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The experts give their recommendations, suggestions, views, and opinions. Please consult a financial advisor before making any investment decisions.)

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