Trade Setup For May 17: Nifty Indicates Strength In Near Term, Volatility To Remain Elevated

India's stock gauge witnessed short covering that led to a rebound on the weekly expiry in the previous session, signalling a bullish momentum ahead, according to market analysts.

This impressive recovery led to the formation of a hammer-candlestick pattern on the daily chart, characterised by a long lower wick, according to Mandar Bhojane, research analyst of Choice Broking. "This pattern is typically a bullish signal, indicating potential reversal from the downtrend and suggesting that buyers have regained control."

If the Nifty index can sustain levels above 22,400, it is likely to move towards the 22,600 and 22,800 levels in the coming days, Bhojane said.

Technically, the index has managed to close above the hurdle of 22,310, where the 21-day exponential moving average was placed. Therefore, the current rally might test 22,500–22,600 levels, according to Neeraj Sharma, assistant vice president of technical and derivative research at Asit Mehta Investment Interrmediates Ltd.

The Bank Nifty is still respecting a bullish engulfing candle, indicating strength, Sharma said. "As long as the index remains above 46,980, the bullish momentum will continue."

Concerns regarding consistent selling from foreign institutional investors, India VIX still above 20 levels, general election and the outcome could keep volatility higher, according to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.

The GIFT Nifty was trading 18.5 points or 0.08% higher at 22,478.50 as of 06:46 a.m.

The Nifty May futures were up by 0.84% to 22,452.35 a premium of 48.5 points, and its open interest was down by 2.68%. The Nifty Bank May futures were down by 0.48% to 48,092.35 at a premium of 115.3 points, while its open interest was down by 2%.

The open interest distribution for the Nifty May 23 series indicates that the 20,200 level is seeing the most put strikes, and call strikes of 23,000 have the maximum open interest.

For the Bank Nifty options' May 22 expiry, the maximum call open interest was at 48,000 and the maximum put open interest was at 45,000.

Overseas investors stayed net sellers on Thursday for the 11th straight session.

Foreign portfolio investors offloaded and sold stocks worth Rs 776.49 crore and domestic institutional investors stayed net buyers for 14th straight session and mopped up equities worth Rs 2,127.8 crore, according to provisional data from the National Stock Exchange.

The benchmark equity indices recovered in the last hour of trade and surged to their highest level in seven sessions. The Nifty reclaimed 22,400 for the first time after May 6.

The Nifty ended 203.30 points higher, or 0.92%, at 22,403.85 and the Sensex closed 676.69 points, or 0.93%, up at 73,663.72.

The broader markets ended higher on the BSE. The S&P BSE Midcap ended 1.07% up and the S&P BSE Smallcap settled 0.85% higher.

On BSE, 19 sectors advanced and one declined, out of 20. S&P BSE Capital Goods was the best-performing sector on Thursday. S&P BSE Utilities was the worst-performing sector.

Market breadth was skewed in favour of buyers. Around 2,140 stocks rose, 1,689 stocks declined, and 123 stocks remained unchanged on the BSE.

• Infosys: The company signs a pact with Telstra for AI-led engineering transformation.

• Indoco Remedies: The USFDA successfully completed the inspection of its API Kilo Lab manufacturing facility at Rabale, Navi Mumbai, and Indoco Analytical Solutions division and concluded with zero Form 483 observations.

• TVS Supply Chain Solutions: The company partnered with Manchester Metropolitan to lead AI innovation.

• GE Power India: The company received a purchase order worth Rs 20 crore from Torrent Power for the repair and service of a steam turbine.

• Vedanta: The board approved raising up to Rs 8,500 crore via equity and approved the investment in Vedanta Copper International for setting up a copper rod plant in Saudi Arabia.

• Vodafone Idea Q4 FY24 (Consolidated, QoQ)

  • Revenue fell 0.6% to Rs 10,607 crore vs Rs 10,673 crore (Bloomberg estimate Rs 10,695 crore).

  • Ebitda down 0.3% to Rs 4,336 crore versus Rs 4,350 crore (Bloomberg estimate Rs 4,321.3 crore).

  • Margin expands 10 bps to 40.9% vs 40.8% (Bloomberg estimate 40.4%).

  • Net loss rose to Rs 7,675 crore vs Rs 6,989 crore (Bloomberg estimate Rs 7,701.1 crore).

Asia-Pacific markets erased gains in early trade Friday as traders pulled back bets of rate cuts by the Federal Reserve after the initial reaction to a softer US. inflation data subsided.

The Nikkei 225 was trading 348.25 points or 0.89% lower at 38,572.01, and the S&P ASX 200 was 27.60 points or 0.35% down at 7,853.70 as of 06:43 a.m.

Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin said Thursday, speaking at separate events, inflation is expected to take longer to reach target 2%, Bloomberg reported.

Early Thursday, the Dow Jones Industrial Average touched the historic 40,000 mark to extend an advance that's been fuelled by bets the Federal Reserve will be able to cut rates this year, Bloomberg said.

The S&P 500 Index and Nasdaq Composite declined 0.21% and 0.26%, respectively, as of Thursday. The Dow Jones Industrial Average fell by 0.10%.

• U.S. Dollar Index at 104.54

• U.S. 10-year bond yield at 4.37%

• Brent crude up 0.25% at $83.48 per barrel

• Nymex crude up 0.20% at $79.39 per barrel 

• Bitcoin was up 0.11% at $65,349.52

The rupee closed flat on Thursday as the dollar index recovered after hitting over one-month low and as banks bought the greenback on behalf of importers, forex traders said. 

The Indian unit settled at Rs 83.50 against the US dollar, unchanged from Wednesday's closing. It opened at Rs 83.46, appreciating 4 paise against the greenback, according to Bloomberg data.