Further market weakness ahead amid fragile global cues? 5 things to know before opening bell

While the relief rally might continue for some more time, volatility cannot be ruled out on account of potential risk from Omicron variant and fragile global cues

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SGX Nifty futures were down 35 points or 0.2% at 16,963 today, suggesting a negative opening ahead on Dalal Street.

The relief rally in markets may continue moving forward. However, volatility is likely to predominate on Monday on account of the Omicron variant threat and weak global cues. Indian equity markets are likely to open lower, tracking weakness across most other Asian markets. SGX Nifty futures were down 35 points or 0.2% at 16,963 today, suggesting a negative opening ahead on Dalal Street. “FII selling has reduced sharply over the last few days due to the festive holidays. After around 10% correction, Nifty is now trading at 19x FY23 P/E and is no longer in the expensive zone. While the relief rally might continue for some more time, volatility cannot be ruled out on account of potential risk from Omicron variant and fragile global cues”, said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

Global cues

Equities in other Asian markets were cautious on Monday as investors assessed the impact of the Omicron variant of COVID-19 on the world economy. MSCI’s broadest index of Asia Pacific shares was up 0.1%. Shanghai composite was trading below the flatline while the Shenzhen component edged 0.20% higher. Japan’s Nikkei 225 slipped 0.22% while the Topix index shed 0.24%. Meanwhile, South Korea’s Kospi climbed 0.26%.

Technical view

After showing upmove in the last three sessions, Nifty slipped into weakness on Friday and closed the day lower by 68 points. A reasonable negative candle was formed on the daily chart with minor lower shadow. The negative candle Friday overlapped the small doji candle of Thursday. Technically, this pattern indicates a formation bearish engulfing pattern at the swing high. Normally, a formation of doji and bearish engulfing pattern back to back after a reasonable rise/ at the key hurdle could signal lower top reversal pattern, said Nagaraj Shetti, Technical Research Analyst, HDFC Securities

The negative chart pattern of lower tops and bottoms is intact as per daily timeframe chart and Friday’s high of 17155 could now be considered as a new lower top of the sequence. Hence, one may expect further weakness in the short term. Nifty on the weekly chart formed a small bull candle with minor upper and lower shadow, which reflects a pullback rally of a down trend. The Nifty is now placed at the support of ascending trend line at 16780 levels as per the concept of change in polarity. The recent pullback rally of the last three sessions seems to have completed around the strong overhead resistance of 17150-17200 levels. There is a possibility of further weakness down to 16700-16650 levels by next week. Any upside bounce from here could be a sell on rise opportunity, he aded.

Key support, resistance levels for Nifty

At present, the Index has support at 16800 levels while immediate hurdle at around 17200 levels, crossing above the same can show 17400-17500 levels. On the other hand, Bank nifty has support at 34300 levels while resistance at 35500 levels, Sachin Gupta, AVP, Research, Choice Broking.

Stocks under F&O ban on NSE

Escorts, Indiabulls Housing Finance, and Vodafone Idea are the stocks under the F&O ban for Monday (27 December). Securities in the ban period under the F&O segment include companies in which the security has crossed 95 percent of the market-wide position limit. All clients/members are required to trade in the derivative contracts of these securities only to decrease their positions through offsetting positions. Any increase in open positions attracts appropriate penal and disciplinary action.

IPO Watch

HP Adhesives listing: The company will make a debut on the bourses on Monday (27 December). The final issue price is Rs 274 per share. The initial public offer of HP Adhesives Limited was subscribed 20.96 times on the last day of subscription on Friday. The offer received bids for 5,29,89,650 shares against 25,28,500 shares on offer, according to NSE data.

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