Markets eye flat start

Domestic equity benchmarks Nifty 50 and Sensex are expected to open on a subdued note on Thursday, December 18, as weak global cues cap early optimism. A sharp overnight selloff on Wall Street, led by technology stocks, has kept risk appetite in check, pointing to a cautious start for Indian markets.

At around 7.45 a.m., the GIFT Nifty was trading at 25,882.5, down 8 points or 0.03 percent, indicating a largely flat to slightly negative opening for the benchmark indices, as investors assess global risk sentiment and await fresh domestic triggers.

Global cues remain weak

US stocks ended sharply lower on Wednesday as technology shares bore the brunt of selling. Renewed worries over artificial intelligence related valuations triggered a broad pullback, pushing the Nasdaq Composite down 1.8 percent.

Heavyweights such as Nvidia, Broadcom and Oracle fell more than 3 percent each. Technology stocks dragged the S&P 500 lower by 2.2 percent, marking its fourth consecutive losing session, while the Dow Jones Industrial Average gave up early gains, weighed down 0.47 percent by losses in stocks such as Caterpillar.

Asian markets opened lower in early trade, mirroring the US weakness. Shares in Japan and Australia declined, along with equity futures for Hong Kong, as investors shifted into a risk off mode. The cautious tone also supported demand for shorter maturity US Treasuries and precious metals.

Key developments to watch

On the domestic front, regulatory developments will remain in focus after the board of the Securities and Exchange Board of India approved a wide set of reforms spanning mutual fund regulations, stock broker norms, IPO disclosures and lock in rules.

The regulator also cleared measures to incentivise debt securities, eased issuance and conversion of physical shares, and raised the threshold for highly value debt listed entities to Rs 5,000 crore to reduce compliance burden. Amendments allowing credit rating agencies to rate instruments regulated by other authorities were also approved, while proposals of the high level committee on conflict of interest were deferred for further discussion.

In global assets, cryptocurrency prices reflected the cautious mood. Bitcoin fell more than 2 percent on Wednesday before recovering part of its losses in early Thursday trade. Analysts note that Bitcoin has been drifting towards the lower end of its recent trading range, with every bounce attracting selling from investors who bought near the record highs seen in early October.

Flows and positioning

Foreign institutional investors remained buyers in the previous session, purchasing Indian equities worth Rs 1,127 crore. Domestic institutional investors also provided support, with net purchases of Rs 769 crore, according to exchange data.

Technical outlook

From a technical standpoint, Nifty continues to move within a consolidation phase. The broader trading range is seen between 26,220 on the upside and 25,700 on the downside. The formation of lower highs, however, keeps the 26,200 zone as a critical level for any meaningful shift in trend.

The derivatives data points to growing caution among traders. Call writers have added fresh positions at at the money and nearby strikes, strengthening overhead resistance on rallies. At the same time, put writers have reduced exposure and rolled positions to lower strikes, indicating expectations of a prolonged sideways phase rather than a decisive breakout or breakdown.

A significant build up of nearly 1.68 crore call contracts at the 26,000 strike underscores it as a strong resistance area. On the downside, around 69.36 lakh put contracts at the 25,500 strike are providing a cushion, suggesting limited immediate downside unless global cues deteriorate further, according to analysts at SAMCO Securities.

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