Market Analysis Report - January 8, 2024, and Pre- Open Market Data Jan 9

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Overview:

On January 8, the Indian stock market witnessed a significant downturn, with the BSE Sensex plummeting 671 points to 71,355, and the Nifty 50 dropping 198 points to 21,513. This decline led to the formation of a long bearish candlestick pattern on the daily charts, suggesting the potential for a trend reversal. Analysts pointed out key technical levels and patterns that investors should monitor to navigate the current market conditions.

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Technical Analysis:

The market is currently hovering around the crucial support level of 21,500, having broken the 10-day Exponential Moving Average (EMA) of 21,569. Despite being within the range of 21,500-21,850, experts warn of the possibility of further downside if the support at 21,500 is breached. The 21,350-21,300 zone is highlighted as a key area to watch for potential downside movements. On the upside, the 21,800-21,850 zone is identified as a formidable hurdle.

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Nagaraj Shetti, a senior technical research analyst at HDFC Securities, emphasized the presence of strong overhead resistance around 21,750-21,800 levels. The formation of a new lower top at 21,763 is seen as a potential bearish signal, with lower supports identified at 21,350 (20-day EMA). Immediate resistance is noted at 21,650 levels.

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Kunal Shah, senior technical & derivative analyst at LKP Securities, indicated a change in market sentiment based on the chart pattern formation. He suggested that if the support at 21,500 holds, a recovery towards 21,650 could be expected, which represents the immediate hurdle zone.

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Market Sentiment and Volatility:

The volatility spiked, as reflected by the 7.06 percent jump in the India VIX to 13.46 from 12.63 levels. The increased volatility has made market participants uneasy.

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Broader Markets:

The broader markets were not immune to the downward trend, with the Nifty Midcap 100 and Smallcap 100 indices falling by 1 percent and 0.6 percent, respectively.

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Options Data:

The weekly options data reveals that the maximum Call open interest is at the 21,700 strike, with 94.32 lakh contracts, acting as a key resistance level. Meaningful Call writing was observed at the 21,600 strike, followed by the 22,200 and 21,700 strikes.

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On the Put front, the 21,000 strike holds the maximum open interest, serving as a key support area for the Nifty. Meaningful Put writing was observed at the 21,100 strike.

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Put Call Ratio (PCR):

The Nifty Put Call Ratio (PCR) fell to 0.84 on January 8, indicating that traders are buying more Calls than Puts. A PCR below 1 suggests an increase in bullish sentiment.

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Institutional Activity:

Foreign institutional investors (FIIs) bought shares worth Rs 16.03 crore, while domestic institutional investors (DIIs) purchased Rs 155.96 crore worth of stocks on January 8.

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Recommendation:

Given the current market conditions, investors are advised to exercise caution and closely monitor the support level at 21,500. A breach of this level may lead to further downside, with the 21,350-21,300 zone as a critical area to watch. On the upside, breaking the resistance at 21,800-21,850 is crucial for a positive reversal. It is recommended to stay updated on market developments and adjust strategies accordingly.

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Disclaimer:

This report is for informational purposes only and does not constitute financial advice. Investors are encouraged to conduct their own research and consult with financial professionals before making investment decisions. The market is subject to rapid changes, and past performance is not indicative of future results. The authors and publishers of this report are not liable for any financial losses or damages arising from the use of this information.