The coming week promises to be an exciting one for Indian stock markets, with the NIFTY and Sensex likely to continue their upward trajectory. Analysts predict a range of 23,150-23,400 for the NIFTY, with a potential push towards 23,500 if positive momentum builds. However, the week won’t be without its bumps, as the expiry of May derivatives contracts and upcoming Lok Sabha election results inject volatility.
Technical Indicators Favor Bulls
Several technical indicators paint a bullish picture. The NIFTY’s breakout above prolonged consolidation and its climb to an all-time high of 23,025 on the weekly chart signal investor confidence. Additionally, the Relative Strength Index (RSI) sits at 67.26, indicating room for further growth before encountering overbought territory. Put options, representing bearish bets, show a concentration of Open Interest (OI) at 22,800, suggesting this level might act as a potential support floor.
Earnings Season and Global Cues
The upcoming week coincides with the tail-end of the Q4 earnings season. Positive corporate earnings reports, particularly from heavyweight sectors like financials and metals, could fuel further market rallies. Investors will also be keeping a close eye on global cues, particularly US stock performances and economic data releases. A strong showing from international markets could bolster domestic sentiment and vice versa.
Volatility Expected with F&O Expiry
The scheduled expiry of May derivatives contracts on the last trading day of the week (May 31st) is likely to introduce volatility. Options traders will be squaring off positions, potentially leading to short-term fluctuations. Investors with a shorter-term outlook may want to consider adopting a stock-specific approach, focusing on large-cap and large mid-cap stocks for better stability.
Election Jitters and Long-Term Outlook
The upcoming Lok Sabha election results scheduled for June 4th cast a shadow of uncertainty. The market’s reaction will depend on the outcome and the perceived stability of the new government. However, analysts generally believe that the long-term outlook for the Indian stock market remains positive, driven by strong economic fundamentals and potential policy reforms.
Stocks and Derivatives to Watch
Here are some stocks and derivatives to keep an eye on during the coming week:
- Stocks: Infosys, HDFC Bank, ICICI Bank, SBI, Hind Unilever, Zomato, IRCTC (These represent a mix of heavyweight companies and those that have shown recent momentum)
- Derivatives: Keep an eye on Open Interest (OI) levels in NIFTY options contracts, particularly at strike prices around 22,800 (put options) and 23,000 & 23,100 (call options)
Conclusion
The coming week presents an interesting confluence of factors for the Indian stock market. While bullish sentiment prevails, investors should be prepared for some volatility due to F&O expiry and upcoming elections. Careful analysis of technical indicators, corporate earnings reports, and global cues will be crucial for navigating the week and making informed investment decisions.
