Nifty, Sensex may edge higher; volatility likely due to Budget, Fed meet outcome

Trends in the GIFT Nifty indicate a firm start for the broader index with a loss of 35 points.

Indian benchmark indices Nifty and Sensex are likely to open on a flat-to-positive note on February 1 ahead of the Interim Budget presentation. Trends in the GIFT Nifty indicate a firm start for the broader index with a gain of around 100 points from Nifty's January 31 closing.

Investor’s focus will be on the Budget even though it is a vote on account, Since it is colliding with the US Fed outcome where rates were kept unchanged, analysts expect markets to see some volatility. Weekly F&O expiry may add to the volatility. However, the overall trend continues to remain positive.

Global cues

US stocks tumbled overnight after the Federal Reserve held interest rates steady while dashing hopes for interest rate cut as soon as March. The three major US stock indices were already weighed down by weakness in tech and tech-adjacent megacap stocks the day after disappointing Google parent Alphabet's results.

All three major indices extended losses after the Fed meeting outcome and Jerome Powell's subsequent press conference. The S&P 500 closed with its steepest daily loss since September 21. The Dow Jones Industrial Average fell 0.82 percent to 38,150.30, the S&P 500 lost 1.61 percent to 4,845.65 and the Nasdaq Composite lost 2.23 percent to 15,164.01.

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Meanwhile, Asian markets were trading mixed in the early trade with Nikkei index down 0.7 percent and South Korea's Kospi index up 0.8 percent.

Technical view

The Nifty momentum setup is providing a divergent signal as both daily and hourly momentum indicators have a negative crossover but prices are moving higher. Under such a situation when the price and momentum indicator are not in sync it generally leads to a range-bound move.

"Considering the event of interim budget volatility is likely to continue. Key support levels are 21,550 – 215,00 while immediate hurdle zone is placed at 21,850 – 21,900," said Jatin Gedia – Technical Research Analyst at Sharekhan.

Bank Nifty witnessed a sharp surge during the day and marched towards 46,000. "On the upside it is approaching key hurdles placed in the range 46,370 – 46,640 where the key daily moving averages are placed. Thus, the current rally can extend towards this zone from a couple of days perspective. On the downside, 45,200 shall act as a crucial support zone," Gedia said.

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