Trade Setup For June 6: Nifty Bull Run Likely To Continue, Focus Now On Fundamentals

With a reduction in volatility after the general election, the bullish momentum in the Indian equity market will continue with a focus to revert to fundamentals, according to analysts.

The narrative around government formation and the Reserve Bank of India's monetary policy will take centre stage in the near term, according to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.

Despite the reduced seats, one can expect the government focus to continue on investment-led growth, capex, infrastructure creation and manufacturing in the long term, Khemka said.

Technically, the Nifty has crossed the hurdle of the 100-day exponential moving average and formed an insider bar candlestick pattern on a daily scale, according to Neeraj Sharma, assistant vice president of technical and derivatives research at Asit C Mehta Investment Interrmediates Ltd. "As long as the index holds above 22,050, bullish momentum will continue. On the upside, 23,000 and 23,350 will act as resistance in the short term."

For the Bank Nifty, the ongoing bullish move can stretch towards 49,700–50,000 levels as long as it holds above 47,500 levels, he said.

The index rebound is encouraging but sustaining above the 22,600 level is crucial for a move towards 23,000, according to Ajit Mishra, senior vice president of research at Religare Broking Ltd. "We continue to favour defensive sectors such as FMCG, IT, and pharma, and recommend being selective in other sectors."

The GIFT Nifty was trading 36 points, or 0.16% lower at 22,676.5 as of 07:20 a.m.

The Nifty May futures were up by 3.08% to 22,584 at a discount of 36.35 points, with its open interest down by 6.8%. The Nifty Bank May futures were up by 4.04% to 48,992.9 at a discount of 61.7 points, while its open interest was up by 20.1%.

The open interest distribution for the Nifty June 6 series indicates that the 20,200 level is seeing the most put strikes, and call strikes of 24,000 have the maximum open interest.

For the Bank Nifty options' June 12 expiry, the maximum call open interest was at 52,000 and the maximum put open interest was at 48,000.

Overseas investors of Indian equities remained net sellers on Wednesday for the second straight session.

Foreign portfolio investors remained net sellers and offloaded stocks worth Rs 5,656.3 crore, while domestic institutional investors turned net buyers and mopped up equities worth Rs 4,555.1 crore, according to provisional data from the National Stock Exchange.

India's equity gauges staged a recovery on Wednesday as they recovered most of the losses incurred by the worst market crash in four years in the previous session. The surge came after the National Democratic Alliance pledged support to form a government for the third term.

The NSE Nifty 50 closed 688.95 points higher, or 3.15%, at 22,573.45, while the S&P BSE Sensex ended 2,303.1 points up, or 3.2%, at 74,382.

Intraday, the Nifty rose as much as 3.59% to 22,670.4, the highest intraday rise since Feb. 1, 2021, while the Sensex advanced 3.41% to 74,534.8.

The market capitalisation of Nifty 50 companies rose by Rs 5.3 lakh crore during trade. All Nifty stocks ended higher during the session.

Shares of HDFC Bank Ltd., ICICI Bank Ltd., Reliance Industries Ltd., Mahindra & Mahindra Ltd., and Axis Bank Ltd. contributed the most to gains in the Nifty.

The broader markets closed higher as the BSE MidCap ended 4.41% up and the BSE SmallCap gained 2.93%.

All 20 sectoral indices on BSE Ltd. rose. Telecommunication rose the most and capital goods underperformed.

• RVNL: The company emerged as the lowest bidder for a project worth Rs 391 crore by Eastern Railway.

• Torrent Pharmaceuticals: The company signed a non-exclusive patent pact with Takeda Pharmaceuticals to commercialise Vonoprazan in India.

• Intellect Design Arena: The company’s consumer banking unit announced the launch of the eMACH.ai Digital Engagement Platform (eMACH.ai DEP) at Money20/20 in Amsterdam. The platform offers a single origination platform for retail, SME and corporate entities and can co-exist with the older version.

Stocks in the Asia Pacific region were trading higher on Thursday after technology companies in the US drove stocks to all-time highs.

The Nikkei 225 was 411 points or 1.05% up at 38,891, and the KOSPI was 27 points, or 1.03% higher at 2,689 as of 07:02 a.m.

The S&P 500 hit a record high for the 25th time this year as US tech companies drove stocks to fresh highs, while US bond yields fell with traders almost fully pricing in two Federal Reserve rate cuts in 2024, according to Bloomberg.

The S&P 500 rose 1.18% and the Nasdaq Composite rose 1.96% as of Wednesday. The Dow Jones Industrial Average advanced by 0.25%.

• US Dollar Index at 104.18

• US 10-year bond yield at 4.28%

• Brent crude up 0.51% at $78.81 per barrel

• Nymex crude up 0.65% at $74.55 per barrel 

• Bitcoin was down 0.32% at $70,988.88

The Indian rupee closed stronger on Wednesday as the dollar index rose on cooling signs of the US labour market.

The local currency strengthened by 16 paise to close at Rs 83.37 against the US dollar; the rupee had opened at Rs 83.46.