Frontline indices the Sensex and the Nifty ended in the red on May 31, snapping the winning run of the last three consecutive sessions as investors remained cautious and booked profit ahead of the release of key macroeconomic data, including April fiscal deficit, and infrastructure output and the March quarter GDP data.
The GDP number is expected to show some impact of curbs triggered by the spread of Covid-19 even as the Ukraine war has added a new challenge to the recovery.
A jump in crude oil prices also dented the sentiment. Crude benchmark Brent Crude traded near the $125 a barrel mark after the European Union decided on a partial ban on Russian oil while the demand scenario improved as China gears up to lift some coronavirus restrictions. Rising demand ahead of peak US and European summer driving season also underpinned oil prices.
The Indian currency came under pressure owing to a rise in crude oil prices. The Indian rupee ended 9 paise lower at 77.64 per dollar.
Headline indices failed to extend the gains and ended in the red, with Sensex falling 359 points, or 0.64 percent, to 55,566.41 and Nifty ending the day at 16,584.55, down 77 points, or 0.46 percent. Mid and smallcaps outperformed as the BSE Midcap index ended 0.49 percent higher while the smallcap index closed the day with a gain of 0.68 percent.
“Profit-booking at higher dragged the benchmark indices in an otherwise clueless market. With corporate earning seasons nearing an end, traders have started hunting for new clues to drive the market also a lot of shifts in portfolios happening," Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities observed.
In the 30-share pack Sensex, 14 stocks ended in the green and 16 in the red. Shares of Mahindra & Mahindra (up 3.61 percent), NTPC (up 3.48 percent), Power Grid (up 2.06 percent), Tech Mahindra (up 1.46 percent) and Tata Steel (up 0.78 percent) ended as the top gainers in the Sensex index.
On the flip side, Sun Pharma (down 3.11 percent), Kotak Mahindra Bank (down 2.55 percent), HDFC (down 2.50 percent), Titan (down 1.67 percent) and Infosys (down 1.54 percent) ended as the top laggards.
Shares of Mahindra & Mahindra (M&M) hit their fresh 52-week high of ₹1,043.15 in intraday trade, buoyed by the company's March quarter results. Many brokerage firms underscored that the automaker's Q4FY22 performance was above their estimates and a strong recovery in its auto business offset the weakness in the tractor business.
Sectoral indices remained mixed. The BSE Power index fell 2.17 percent while the realty index rose 2.11 percent. BSE Utilities fell 1.95 percent while the metal index rose 1.78 percent.
"Domestic market failed to hold on to recovery mode as it was awaiting the release of Q4 GDP data. GDP is expected to register a slower growth rate of 4-4.2 percent as the consumer spending and investments were hit by soaring inflation. A hike in oil prices due to the EU’s ban on Russian oil imports would act as a headwind in taming global inflation. Changes in policy by central banks would be a major factor to be monitored in the coming days," said Vinod Nair, Head of Research at Geojit Financial Services.
As per Chouhan of Kotak Securities, a double top formation on intraday charts and Doji candlestick formation on daily charts indicate further weakness from the current levels.
"We are of the view that in the near future 16,700 (55,925 on the BSE Sensex) would act as a key resistance level for the traders. Below which Nifty could retest the 16,450-16,400 (54,900-54,700 on BSE Sensex). On the flip side, a fresh uptrend rally is possible only after the Nifty crosses the 16,700 (55,925 on BSE Sensex) range breakout. Above which it could move up to 16,775 (56,200 on BSE Sensex)," said Chouhan.
"The larger texture of the market is still on the positive side, Hence, contra traders can take a long bet near 16,400 on the Nifty (54,700 on BSE Sensex) with a strict stop loss near 16,350 on the Nifty (54,550 on BSE Sensex),” Chouhan added.
As per Palak Kothari, a research associate of Choice Broking, Nifty has formed a 'Bearish Harami' kind of candlestick pattern on the daily timeframe which indicates weakness for upcoming sessions.
"Nifty has given closing above 21-hourly moving average which indicates sustaining above the same can show upside moment in the counter. However, the momentum indicators MACD & Stochastic were trading with a negative crossover on an hourly chart which suggested a southward journey in the counter. The Nifty may find strong support around 16,400, while on the upside 16,750 may act as an immediate hurdle," said Kothari.
Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in pointed out that the Nifty50 seems to have registered an 'inside bar' kind of formation as its trading range for the day is confined to that of the Monday’s session between 16,695 and 16,506. However, a late sell-off in the last 30 minutes of the session can be a matter of concern.
"If Nifty slips below 16,500 in the next session then it can extend the weakness towards 16,370 to bridge the bearish gap present between 16,506 and 16,370. However, if bulls manage to push the index above 16,690, the Nifty may gain strength. But in that scenario, upsides shall be limited to 16,750 where the 200-day exponential moving average (EMA) is present. Hence, for a sustainable up-move, further confirmation in the form of a close above 200-day EMA is required. For the time being, traders are advised to remain neutral on the index trades," said Mohammad.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.