Bears are expected to maintain their control on Tuesday, as global sentiment remains weak. The initial levels suggest a flat to positive start for Nifty, but analysts are warning of further pain in the broader market, particularly with mid-cap and small-cap stocks taking a hit. The imposition of tariffs by the new US administration and disappointing Q3 results from Indian companies are contributing to the selling pressure, with foreign portfolio investors continuing to unload their positions.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services Ltd., noted that the recent victory of the BJP in the Delhi Assembly election was anticipated to stabilize market sentiment. However, global concerns and foreign investor activity have overshadowed this impact. Looking ahead, the focus will return to Q3 earnings, corporate guidance, and global macroeconomic factors, especially in light of the uncertainty stemming from President Trump’s trade policies.
The derivatives data reflects a bearish undertone, with call sellers outweighing put writers. New call writing at various strike levels signals resistance, while put unwinding at lower strikes indicates a bearish stance. The Put-Call Ratio (PCR) has declined, further supporting a bearish sentiment. Despite heightened volatility, the ‘Max Pain’ level suggests limited downside. In such a weak market environment, a ‘Sell on Rise’ strategy is recommended.
Asian markets are trading lower on Tuesday, following President Trump’s imposition of new tariffs on aluminium products. Additionally, there has been a trend of outflows from India-dedicated funds since the beginning of the year.
Elara Securities highlighted that India has witnessed significant outflows from foreign funds since October ’24, with dedicated funds contributing to a large portion of the redemptions. The recent acceleration in redemption pressure on dedicated funds is a new development, representing a shift in the sources of outflows from India. Despite a strong closing in the US markets, inflows are slowing down, while redemption pressure on most emerging market funds has eased, except for India.
Overall, the challenging market conditions and lackluster sentiment suggest a cautious approach for investors. The unpredictability in global markets and ongoing geopolitical tensions may continue to weigh on investor confidence, making it crucial to stay vigilant and adapt to the evolving landscape.
