Last week, the stock market closed with a jaded look. The markets had to shoulder the burden of a roaring up move that appeared as a relief rally to some, while some viewed it as the start of a new bull phase. Or even better, an end to a bear market correction. Whichever way one was to look at it, rejection trades emerged across the board. However, it was also evident that bulls never left the scene, as Thursday’s sharp upmove stubbed out the start of a down move that was signalled by an evening star, a three-candle stick bearish reversal pattern. Let us see how the stock market is poised for the next week.
FIIs’ short covering was not an expiry-led event alone. Throughout the week, and post-expiry, FIIs continued to hold at least 30% or more of their index future position as long as possible, a far cry from the sub-20% levels seen early this month. As noted last week, 30% is our benchmark which marks a shift towards the phase of uptrend in Nifty on the back of anticipated short covering. The index future long proportion closed the week at 35%, suggesting that the short covering witnessed late last week was not purely induced by derivatives expiry alone. We remain hopeful towards more additions in index future longs.
Nifty’s rollovers for March stood at 76.09%, falling short of the 3-month average of 80.15%. Bank Nifty’s rollover was 76.98%, down from 81.64% in February. In March, an impressive 78.50% of stock futures ended positively, a dramatic rise from February’s 17.06%. This figure is also significantly higher than the 45% positive closing rate observed in March 2024.
The highest rolls were seen in RBL, Crompton Greaves, Mahanagar Gas, Infosys, and Tube Investment of India while the lowest rolls were seen in DMart, HCL Technologies, Phoenix, and Bajaj Finserv. Sector-wise, Consumer Durables, Auto, Power, and Infrastructure saw the highest rollovers, while Oil & Gas had the lowest. We saw the highest long buildup in Cement, Oil & Gas, Realty and Power signalling optimism in these industries.
Nifty IT making a ‘U’ turn
The Nifty IT Index has been declining since Dec 2024 and has taken support around the widening wedge pattern support in the weekly scale maintaining the upward trajectory intact. We expect the index to gain momentum from here on and possibly move towards the retracement level of 40,200 initially and thereafter towards 42,380 (61.8% Fibo retracement level of December 2024 high and March 2025 low). The average RSI of the index majors is hovering near 50 hinting at strength. We expect stocks like Tata Consultancy Services, Infosys, HCL Tech, LTIMindtree, Tech Mahindra, and Persistent Systems to lead the index towards the expected upswing in the coming weeks leading into the Q4 earnings season.
Nifty CPSE set for consolidation, but larger up moves to follow
The Nifty CPSE Index broke out of the falling trend channel last week, followed by a doji this week hinting at indecision or a slowdown. However, we feel that the strength is intact and the uptrend that has come off the monthly tweezer bottom candle pattern formation is likely to continue after a consolidation. The monthly SMIO histogram has seen a reversal signalling early pullback. We expect stocks like Oil & Natural Gas Corporation (ONGC), National Hydroelectric Power Corporation, Bharat Electronics, Coal India, Oil India, NTPC, NLC India and SJVN to gain strength in the second half of the week leading the index towards the expected 6,575.
Nifty outlook
Sandwiched between the start of the new derivative series and the upcoming earnings season, and with Trump’s Tariff threats looming large, Nifty is looking for fresh cues to resume the uptrend. Undoubtedly, this also means that the 23,800-24,200 region which we had marked as a supply zone will continue to attract rejection trades, and a pullback to 23,300 or 23,050 may not be surprising. That said, sharp cuts towards the 3,050-22,650 region may revive bargain-hunting interest and rejuvenate the upmove and encourage us to look forward to 24,857 as our short-term objective.
First published in Financial Express
