Trade Setup For Aug 29: Nifty To Test New Highs While Weak Nvidia Outlook Hits Global Stocks

As the markets head into Thursday's session, all eyes will be on whether the NSE Nifty 50 can sustain above the Wednesday's high of 25,130, a threshold that could dictate the market's direction. 

US-chipmaker Nvidia's earnings are expected around 2 a.m. IST, which is after the American market hours. Traders await to see whether the AI-induced euphoria has run its course or if the bull market has any sustenance left. The Indian market is expected to take cues from how Wall Street performs on Wednesday, given the massive influence that Nvidia has on broader indexes. 

Analysts caution that a failure to break this resistance may trigger short-term consolidation or profit-taking, as indicated by the spinning top candlestick pattern. Traders might consider booking profits if the index remains below this level, said Hrishikesh Yedve, AVP technical and derivatives research of Asit C. Mehta Investment Intermediates. On the other hand, a sustained move above 25,130 could reignite the rally towards 25,300–25,500, with immediate support seen near the 24,820 mark.

The Nifty's recent performance shows signs of losing momentum, as shown by a long-legged doji candlestick pattern and a potential bearish divergence in the relative strength index, according to Aditya Gaggar, director of Progressive Share Brokers. "A break below 24,970 could see the index sliding further to 24,840, while on the flip side, a firm close with a bullish candle above 25,100 is a must to continue its northward journey," he said.

Despite reaching new all-time highs on Wednesday, the Nifty failed to sustain its gains and closed near its opening range, signalling indecision in the market, according to Avdhut Bagkar, technical and derivatives analyst of StoxBox. 

However, profit-booking in the late trading session suggests caution. Nifty's struggle to maintain its upward momentum comes amid weak global sentiments, said Hashim Yacoobali, director of South Gujarat Shares and Sharebrokers. Investors should brace for potential volatility as the index tests these critical levels, he warned. 

The GIFT Nifty, an early indicator of the Nifty 50's performance in India, was up 27.5 points or 0.11% at 25,005.5 as of 6:38 a.m.

F&O Action

The Nifty August futures were up 0.14% to 25,048 at a discount of 4 points, with open interest down by 27.3%.

The Nifty Bank September futures were down by 0.25% to 51,406 at a premium of 262 points, while its open interest was up by 64.8%.

The open interest distribution for the Nifty 50 Aug. 29 expiry series indicated most activity at 25,500 call strikes, with 24,800 put strikes having maximum open interest.

For the Bank Nifty options expiry in September. 4, the maximum call open interest was at 52,000 and the maximum put open interest was at 52,000.

FII/ DII Activity

Overseas investors turned net sellers of Indian equities on Wednesday after being buyers for four straight sessions.

Foreign portfolio investors offloaded stocks worth Rs 1,347.5 crore and domestic institutional investors turned net buyers after selling for a day and bought equities worth Rs 439.4 crore, the NSE data showed.

Market Recap

The benchmark equity indices continued their uptrend on Wednesday, with the NSE Nifty 50 recording its best gaining streak since October 2020 to close at its lifetime high and the S&P BSE Sensex extending gains for the seventh consecutive session.

The Nifty closed 34.6 points, or 0.14%, higher at 25,052.35 and the Sensex ended 73.80 points, or 0.09%, higher at 81,785.56.

During the day, the Nifty rose as much as 0.45% to its highest level of 25,129.60 and the Sensex jumped 0.40% to 82,039.65, 90 points shy of its lifetime high.

Major Stocks In News

• One 97 Communications: The company has received approval from the Finance Ministry for downstream investment into Paytm Payment Services. Paytm Payment Services will resubmit its payment aggregator license and continue to provide online payment aggregation services to its existing partners.

• InterGlobe Aviation: Founder Rakesh Gangwal and Chinkerpoo Family Trust seek to sell up to 1.47 crore of the of the company's shares at a floor price of Rs 4,953 per share, which indicates a 5.5% discount to CMP and a 5.5% discount to the current market price.

• Genus Power Infrastructure: The company's arm has been awarded letters for three contracts valued at Rs 4,469 crore to appoint advanced metering infrastructure service providers.

• KEC International: The company received a new order worth Rs 1,171 crore for its transmission and distribution business in the UAE and Saudi Arabia.

• Tata Steel: The company has purchased 178 crore shares of Tata Steel Holdings for Rs 2,348 crore. Following the acquisition, Tata Steel Holdings will remain a subsidiary.

• PB Fintech: Tencent Cloud looks to sell a 2.1% stake or 97 lakh shares, in the company at Rs 1,660.20 per share, which indicates a 4.5% discount to the current market price.

• Reliance Industries: CCI approved the Reliance-Disney merger, subject to compliance with voluntary modifications.

• MTNL: Union Bank freezes company accounts over non-payment of dues. All accounts, including collection and the current account, have been frozen due to the loan account turning NPA.

• Sonata Software: The company has received a multi-year, multi-million-dollar IT outsourcing contract from a US-based healthcare and wellness company.

• NLC India: The company has entered into a power usage agreement to supply 200 MW of green power to Telangana for a duration of 25 years.

Global Cues 

Stocks in the Asian-Pacific region declined on Thursday following its Wall Street peers after chipmaker Nvidia Inc.'s revenue forecast fell short of the highest analyst estimates.

South Korea led the losses with the Japanese and the Australian benchmarks falling over half a percent. The Nikkei 225 was 0.6% lower at 38,145, and the S&P ASX 200 was 0.57% down at 8,037 as of 6:26 a.m.

China's economic outlook took a beating again with the UBS downgrading the South Asian giant's growth this year and next, on its property market slump.

The artificial intelligence leader's third-quarter revenue forecast was about $32.5 billion against the highest estimate of $37.9 billion, leading to its shares decline more than 8% in after-hours trading. The Jensen Huang led company approved an additional $50 billion in share buyback on Wednesday.

US stocks were hit in late trading hours as the technology companies dragged the benchmarks lower on dampened AI outlook. The S&P 500 and Nasdaq Composite slipped 0.60% and 1.12%, respectively. The Dow Jones Industrial Average declined 0.39%.

Brent crude was trading 0.05% lower at $78.61 a barrel as of 06:35 a.m. Gold rose 0.38% to $2,514.01 an ounce.

Key Levels

• US Dollar Index at 100.98.

• US 10-year bond yield at 3.84%.

• Brent crude down 0.05% at $78.61 per barrel.

• Bitcoin was down 0.53% at $59,035.43.

• Gold rose 0.38% at $2,514.01.

Money Market

The Indian rupee closed weaker against the US dollar on Wednesday due to month-end dollar demand from importers. However, easing oil prices and continued intervention by the Reserve Bank of India limited the losses.

The local currency depreciated by 4 paise to close at Rs 83.96 and opened at Rs 83.95, according to Bloomberg data. It had closed at Rs 83.92 on Tuesday.