Stock Tracker: Nifty Nearing Critical Points as Foreign Investors Increase Short Positions - A Focus on Nine Stocks Potentially Facing Downturn, Including HDFC Bank and Reliance Industries
In the Indian stock market, a wave of bearish signals has been observed, particularly in the financial services and energy sectors. This trend could potentially impact major indices like the Nifty.
The broader market sentiment has been bearish, with 2,414 out of 4,215 BSE stocks declining recently, indicating a general downturn pressure. Financial sector heavyweights like SBI, Axis Bank, and HDFC Bank are closely watched, though specific negative technical signals were not explicitly mentioned for these stocks in the latest reports.
In the energy sector, steel producers such as SAIL face technical selling pressure. SAIL failed to hold above its 55-day EMA, with the MACD indicator deep in negative territory and RSI around 37, signaling momentum weakness. Support for SAIL is identified near ₹118-116 but it needs to break above ₹130 for a reversal. Tata Steel is under neutral sentiment but still vulnerable to global headwinds affecting the commodity space.
Selling pressure is also reported in several industrial and infrastructure-related stocks, which are part of the broader energy/material sectors.
The options market shows a put-call ratio moving towards 0.5-0.7, indicating higher call selling relative to put selling, which reflects a bearish mood among traders ahead of market opens.
Approximately 60% of Nifty 500 constituents are trading within 2% of the lower Bollinger Band. Many of these stocks have either slipped below their Supertrend indicators or registered bearish MACD crossovers.
The Nifty Energy Index has been facing downward pressure since July and is expected to drop to 33,115 in the short to medium term. The Nifty IT is 13% below its 200-day SMA, making it the sector furthest below this moving average. The Nifty is close to reaching its 200-day Simple Moving Average, currently located at approximately 24,000.
However, it's important to note that macro catalysts like government GST reforms and easing geopolitical tensions have recently provided positive lifts, as seen with the Sensex gaining over 600 points and the Nifty touching 25,000 briefly. Hence, while bearish technical indicators suggest caution, broader market moves will likely also depend on policy developments and global demand.
Two AI stocks are flashing a contrarian buy signal, despite the Nifty being only 1.3% above its 200-day SMA. The index is expected to find support near 25,850, but if this level is breached, the decline could accelerate toward 25,600.
In conclusion, while bearish signals are prominent in the Indian stock market, particularly in the financial services and energy sectors, the market's future direction will depend on a balance of technical indicators, macroeconomic factors, and policy developments.
[1] - Source: Moneycontrol [2] - Source: Zee Business [3] - Source: Business Standard [4] - Source: NSE India
Author: Anand James, Chief Market Strategist at Geojit Investments.
- Given the bearish trend in the Indian stock market, investors might consider diversifying their portfolio to include sectors less impacted by the current market conditions, such as the technology sector, where two AI stocks are flashing a contrarian buy signal.
- Traders should be cautious about investing in stocks from the financial services sector, as well as the energy sector, particularly steel producers like SAIL and Tata Steel, given the technical selling pressure and bearish momentum indicated by various financial indicators.
- With 60% of Nifty 500 constituents trading near their lower Bollinger Bands and bearish MACD crossovers, trading and investing in the market could potentially yield losses in the short to medium term, particularly for stocks in the energy and IT sectors.
- While the options market reflects a bearish mood among traders, macro catalysts like government GST reforms and easing geopolitical tensions could provide counterbalancing positive influences on the stock market, as evidenced by the recent gains in the Sensex and Nifty.
- The downward pressure on the Nifty Energy Index and the Nifty IT index raises concerns about the overall health of the Indian stock market. However, the market's direction will ultimately depend on a careful assessment of both technical indicators and broader macroeconomic factors, including policy developments and global demand.
