Weekly market outlook: Q4 earnings, key F&O indicators and global trend among key factors to set market mood this week

Markets made a fresh all-time high but ended the volatile and range-bound week on a flat note. The NIFTY50 index gained 0.2% for the week to close at 22,475 while the SENSEX closed 0.2% higher to close at 73,878.

In the broader market, index performance was mixed. The NIFTY Midcap 100 index rose by 0.6%, while the Smallcap 100 index fell by 0.2%, highlighting the different investor sentiment across market segments.

On the sectoral front, PSU Banks (+2.0%) and Auto (+1.9%) extended their winning streak for the second consecutive week. Media (-3.3%) and IT (-2.2%) were the top losers.

Following the second phase of the Indian general election, the India VIX (volatility index) spiked by 33% last week. This spike in volatility caused the NIFTY50 to experience sharp intraday swings, highlighting the market's sensitivity to political developments.

Index breadth- NIFTY50

The breadth of the index remained range bound throughout the week. As of Friday, 52% of the NIFTY50 stocks were trading above 20 day moving average (DMA), while 58% of the stocks were trading above 50-DMA.

In last week's blog we discussed the significance of crossover of stocks trading above their 20-day and 50-day moving averages (DMAs), represented by the blue and green lines on our charts. This crossover is a key indicator of increasing momentum in the market. On the other hand, when the breadth indicator is between 50 and 70, it indicates that the market is range-bound. Currently, with both indicators below 60, it indicates potential weakness in the market. Traders should keep an eye on these crossovers for further insight into the market's direction.

FIIs positioning in the index

The Foreign Institutional Investors (FIIs) sent mixed signals during the week with context to the index futures open interest (OI). The FIIs after starting the May F&O series with the long to short ratio of 35:65 flipped the ratio two times in the last one week. On 30 April, the ratio went in favour of net long contracts with the figure of 52:48 and on 3 May, Friday this ratio was again flipped in the favour of net short contracts to 44:56.

Such mixed signals highlight investor indecision, which in turn leads to sharp price swings on an intraday basis. Currently, the total OI is net short (over 47k), indicating resistance at higher levels for the indices.

F&O - NIFTY50 outlook

Options data of 9 May expiry highlights significant call OI at 22,800 and 22,700 strikes, which will act as immediate resistance. On the flip side, the put options have bases at 22,000 and 22,500 strikes.

In our last week’s blog we highlighted that the index formed a shooting star in the week ending 8 April and it may encounter resistance near the 22,500-22,600 zone. This week, the index once again witnessed selling pressure in this zone and failed to close above it on the weekly timeframe.

Going forward, the index has immediate support at 22,100 and the resistance remains at 22,800. A break above or below these levels will provide traders further directional clues. With the volatility index jumping 33% last week, traders are advised to remain cautious of sharp price swings which may occur during intraday basis.

F&O - BANK NIFTY outlook

The open interest for the May 8 expiration has significant call OI at 49,500 and 50,000 strikes, while the put OI is at 48,500 and 49,000 strikes. There is also significant call and put OI at the 49,000 strikes.

In last week's analysis, we said that the BANK NIFTY had formed a doji candle on the weekly chart and a break of the high and low of doji would provide further directional clues. Last week after breaking the high of the doji, the index hit a new all-time high and came within the striking distance of the 50,000 level.

However, the BANK NIFTY failed to hold on to its gains and slipped below the 49,000 level. On the weekly chart, the index has formed a shooting star candle, which is a bearish reversal pattern. The pattern will be confirmed if the next candle closes below the shooting star. Going forward, the index has immediate support in the 48,300-48,500 zone, while resistance remains at the 49,500 level.

📈📉Earnings blitz: As earnings season enters the fag-end the key companies which will declare fourth-quarter results this week are Larsen and Toubro, Dr. Reddy’s Laboratories, JK Cement, UPL, AB Capital, Bharti Airtel, Colgate-Palmolive, PFC, Hindustan Aerounatics, Biocon, Lupin, Marico, Hero Motocorp, TVS Motor and JSW Steel.

🗓️Key events in focus: Traders will keep an eye on speeches from the officials of the U.S. Federal Reserve and the interest rate decision from the Bank of England.

💻Spotlight: The U.S. Federal Reserve kept the interest rate unchanged and steady at a range of 5.25% to 5.50%. Fed Chairman Jerome Powell acknowledged that recent inflation readings had come in higher than expected. However, on Friday the U.S. economy added 175,000 jobs in April, down from 315,000 in March, which was below the estimate of 2,35,000.

📊Stocks in focus: As per the open interest data and price action of Friday, the stocks which witnessed long build-up were Coal India, Shree Cements and Cummins India. Similarly, to track the OI losers login https://pro.upstox.com➡️F&O➡️Futures smartlist ➡️OI gainers/losers/most active.

📓✏️Takeaway: After hitting a fresh all-time high, the NIFTY50 index faced resistance at higher levels and slipped below the crucial 22,500-mark. Currently, the index is consolidating between 22,700 and 21,700 amid ongoing India's parliamentary elections.

For the coming week, key support for the index is at 21,777 - the swing low of 19 April. A break below this level would indicate a reversal in the trend. Conversely, key resistance is at 22,525. If the index closes above this level on a weekly basis, it will resume its upward momentum.

And we'll keep you updated on the changes and important developments via our morning trade setup blog, which is available every day before the market opens at 8 am.

Disclaimer

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