Domestic markets are expected to open on a positive note following the US Fed’s dovish comments. Gift Nifty at 23,080 indicates a gap-up opening of about 100 points for Nifty. Asian markets are also up in early trade on Thursday, presenting a positive mood from all corners.
Analysts expect the market to remain in consolidation mode with participation from small and mid-cap stocks. They believe the market will show strong resilience if FPIs return as buyers, even as they expect moderation in their selling in the near term.
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US Fed decision
Meanwhile, the US Federal Reserve held interest rates steady on Wednesday, keeping its benchmark rate at 4.25-4.5 per cent, as was widely anticipated. The policymakers indicated they will likely lower borrowing costs by half a percentage point by the end of this year. However, the central bank hiked its projection of US inflation in 2025 and downgraded the US economic growth forecast.
Analysts expect the market to continue the momentum amidst positive indications from the FIIs and continued domestic buying
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Nifty/DJ ratio
According to ICICI Securities, the Nifty/Dow Jones ratio chart has recorded a breakout from a six-month falling channel, indicating the domestic market could relatively outperform US equities going forward. Over the past three decades, the average drawdown below the 52-week EMA as been 6-7 per cent, followed by over 20 per cent returns over the next 12 months. The Nifty is currently about 6 per cent below its 52-week EMA, supporting a potential recovery, it further said.
Besides, the cooling off in US 10-year Yields, Dollar Index, and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment, it further said, adding that the monthly stochastic oscillator is in extreme oversold territory at 13 (the lowest since 2002), indicating an impending pullback.
According to Bajaj Broking Research, Nifty extended up move for the 3rd session in a row and closed above 22,900 levels. The index on the daily chart has formed a small bull candle with shadows in either direction, signalling consolidation with positive bias after Tuesday’s strong up move. According to it, the index on expected lines extended up and is seen heading towards 23,000-23,200 levels in the coming sessions. Immediate support is placed at 22,500-22,600 levels, which is the confluence of 20 days of EMA and the Tuesday bullish gap area. Immediate resistance is placed at 23,000-23,200, the confluence of the 50-day EMA and the trendline resistance joining the last 6 months’ highs. “Overall structure is positive we expect the index to move above the same and head towards 23,500 levels in the coming weeks,” it said.
Similarly, Bank Nifty gained for the fifth session in a row as it formed a second consecutive strong bull candle with a higher high and higher low, highlighting strength and extension of the up move, the domestic brokerage said. “Going ahead, we expect the index to maintain positive bias and head towards 50,100 and 50,600 levels in the coming sessions. While immediate support is placed at 48,800-49,000 levels being the confluence of key retracement of current up move and 20 days EMA. Index in the last 9 weeks has been consolidating in the broad range of 47,700-50,600. Buying demand has recently emerged from the lower band of the range and we expect the index to head towards the upper band of the range placed at 50,600. We believe a breakout above the upper band will signal a major reversal of trend,” it added.
According to ICICI Securities, On the broader market front, the Midcap and Small-cap indices witnessed supportive efforts in the vicinity of 61.80 per cent retracement while protecting the previous week’s low, indicating strength. “Both the indices witnessed buying demand from the decade-long trendline (Adj Jan 08 high and Oct 21 high) coupled with a positive divergence of the RSI, suggesting that the midcap index could witness extended pullback toward 51500, while the small-cap index may reach 16000 levels. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner,” it. Further said
