Domestic markets are expected to open flat on Tuesday, influenced by weakness in global markets. The pre-market indicator, Gift Nifty at 22,588, suggests a marginal decline at the opening bell. Analysts anticipate some short covering ahead of the F&O expiry on Thursday and potential value buying at lower levels. Despite the overall bearish sentiment, analysts are hopeful for a technical pullback.
According to Osho Krishnan, Sr. Analyst at Angel One, the recent downward trend in the benchmark index has led to a significant breakdown of the falling wedge pattern, signaling a shift in market structure and dampened sentiment. The Advance Decline ratio reflects a dominant bearish trend, especially in the IT and metals sectors.
Derivative trading data also indicates a pessimistic outlook. Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities, notes that call writers are dominating over put sellers, showcasing a cautious approach in the market. Significant open interest build-up at the 23,000-strike call and substantial put writing at the 22,500 strike suggest strong resistance and support levels, respectively. The 22,700–23,000 zone is under pressure from call writing, while unwinding at lower put strikes indicates a shift towards deeper support levels.
Volatility remains a key factor to monitor, with India VIX slightly decreasing to 14.42, implying a reduction in risk perception. As long as VIX remains below 15, volatility is expected to be contained, maintaining cautious market sentiment.
In Asia-Pacific markets, early trades on Tuesday are following the trend of weak US stocks from the previous session.
Overall, the market outlook remains challenging, with various indicators pointing towards continued weakness. Analysts advise caution and strategic decision-making in the current market environment.
