Markets to see 'heightened volatility' ahead of Bihar poll outcome, say experts; key Nifty levels to watch

Markets to see 'heightened volatility' ahead of Bihar poll outcome, say experts; key Nifty levels to watch

Benchmark indices Sensex and Nifty will remain volatile on November 14 ahead of outcome of the Bihar assembly polls, said experts.

This was illustrated when Indian equities ended flat on Thursday, as gains in metal stocks and upbeat earnings were offset by caution ahead of Bihar's state election results, seen as key for policy continuity.

While the overall market remains positive due to improving domestic demand, record-low headline inflation, easing trade worries and earnings optimism, investors took a breather ahead of the Bihar state election results on Friday, three analysts told Reuters.

Exit polls suggest the ruling National Democratic Alliance is on track to retain power in the state.

"A negative surprise in Bihar elections outcome would signal weakness in markets," said Dhupesh Dhameja, analyst at SAMCO Securities.

"Amidst continued outflows from FII and a weak rupee, profit-booking emerged at elevated levels ahead of the Bihar election results, which left the benchmark indices largely unchanged by the close," said Vinod Nair, Head of Research, Geojit Investments Limited.

Key levels to watch

Technical charts indicate investor caution ahead of the major event, said Dhameja.

"On Thursday, the Nifty index inched up by 3.35 points to close at 25,879.15, forming an indecisive Doji candlestick on the daily chart — signalling investor caution ahead of the major event. Nonetheless, the index’s sustained trade above the previous week’s high strengthens the improving technical structure, reflecting that buyers are gradually regaining control over market direction. Despite witnessing a sharp rejection near the 26,000 mark, highlighting it as a key overhead resistance, Nifty continues to maintain its footing above the crucial 25,800–25,700 zone.

"As long as Nifty sustains above the 25,700–25,650 region, a “buy-on-dips” approach remains favourable among traders. On the higher side, immediate resistance is seen around the 26,000 level. A breach below 25,750 may invite renewed selling pressure and spark caution among market participants. Momentum indicators are also echoing a constructive outlook—the 14-day RSI continues to hover above 60, indicating firm short-term momentum," said Dhameja.

Bajaj Broking Research also flagged the "elevated volatility" ahead of the poll outcome.

"Nifty formed a high wave candle on the daily chart with a higher high and a higher low signaling consolidation with positive bias amid elevated volatility ahead of the Bihar election outcome. Going ahead, the index to maintain positive bias while holding above Wednesday bullish gap area (25715-25780) and head towards 26,100 levels and then towards the all-time high of 26277 in the coming sessions. Key short-term support is placed at 25,300–25,400 levels which aligns with the 50-day EMA, the previous breakout level, and the 50% retracement of the earlier up move (24,587–26,104)."

"With retail inflation easing, the approved exporters’ policy support package, and the corporate earnings season concluding on a positive note, the backdrop for equities remains supportive. Friday's session may see heightened volatility due to the Bihar election outcome," said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.