Closing Bell: Nifty ends at 16,300, Sensex down 365 pts; power, metal, PSU banks drag

Reliance BrandsLimited (RBL) commences a new journey with the icon of Italian luxury lifestyle Tod’s S.p.A. With this long-term Franchise agreement, RBL has become the official retailer of the brand across all categories including footwear, handbags and accessories in the Indian market.

The management of existing channels will be taken over by Reliance Brands Limited and the focus will be on enhancing the brand’s potential in the market and strengthening their digital presence.

Nifty closed with a green candle as the market recovered from the lows. The entire decline from 18100 is in three “legs” a classic AB=CD pattern is formed and if we take the entire price action from the low of March 2022.

The pattern in play is a Gartley 22 XABCD pattern. Gartley 22 is a harmonic pattern and suggests temporary trend exhaustion. The typical target for Gartley 22 is 38.2 retracement from the high. This gives us a minimum target of 16900 which can extend to 17400.
Also, the Nifty has formed a bullish harmonic pattern which does point toward a quick recovery in the markets. Nifty is currently in a major support zone and it is stabilising in this zone. Nifty needs to trade above 16490 to establish a short term bottom and propel itself to higher levels.

Support for Nifty is at 16100 and if Nifty breaks below 16100 then fall up to 15700 may be possible. Nifty is in an extremely oversold state and it is a high probability that the markets will reverse sharply from here. Avoid being heavily on the short side of the market.

Markets started the week on a feeble note and lost over half a percent, in continuation of the prevailing corrective phase. Weak global cues triggered a gap down start, followed by volatile swings till the end. Finally, the Nifty ended at 16,310 levels, down by 0.6%.

Meanwhile, buying in select sectors such as IT, pharma and financials supported the benchmark to cap the downside while media, energy and PSU banks remained under pressure. The broader indices, midcap and smallcap, underperformed the benchmark and ended lower in the range of 1.7-2%.

We’re not seeing any respite in the global markets, especially the US, and we’re largely reflecting the same trend at our end too. Besides, mixed Q4 earnings are further adding to the negativity.

We reiterate our view to focus on shorting opportunities on the rise until we see some sign of reversal. On the index front, support is intact at 16,000 in Nifty and the 16,550-16,650 zone would act as immediate hurdle.

Higher dollar rates above $104 indicate FII's aggressively exiting from emerging markets, higher Vix indicate no trend is sustainable and due to higher inflation aggressive liquidity squeeze from Central Banks pressures rupee altogether making rupee hit an all-time low. Crude prices have also been rising for a month now making the rupee even weaker.

I look at the rupee continuing its downward journey as dollar prices rise is a major risk to prices. A relief on the rupee front can only be seen if the dollar index cools off hence rupee can be seen as weak till the time it's below 76.50, on the lower-end rupee can touch 78.00 in coming sessions which shall create fresh short unwinding in the dollar and making rupee even weak.

There seems to be no respite for the markets from the bear hug as the weak Asian gauges and fall in European indices dampened the investors' sentiment. Post the results, Reliance Industries came under severe hammering, which dragged the overall markets. Both external and internal factors are in the works for sometime, which is putting pressure on the markets to come out of the weak sentiment.

On intraday charts, the Nifty showed some recovery from the day's lowest level. We are of the view that the larger texture of the market is still negative but if the index sustains above 16200, a pullback formation is likely to continue up to 16450-16550 levels.
On the flip side, below 16200, a fresh round of selling could be seen and below which, the index could touch the level of 16140-16100.

The market continued its downward rally amid lingering concerns over the weakening rupee, global interest rate hikes and tightening lockdowns in China.

The relentless rise in the US dollar index owing to interest rate hikes and rising US treasury yield hammered investor's risk appetite.

Strong US jobs data indicated possibilities of faster rate hikes forcing investors to opt for safe-haven assets

Benchmark indices ended lower in the volatile session on May 9 with Nifty finishing just above 16300 amid weak global cues.

At close, the Sensex was down 364.91 points or 0.67% at 54470.67, and the Nifty was down 109.40 points or 0.67% at 16301.90. About 1036 shares have advanced, 2353 shares declined, and 140 shares are unchanged.

Reliance Industries, Hero MotoCorp, Nestle India, IndusInd Bank and Tata Steel were among the top Nifty losers, while gainers were Power Grid Corporation, HCL Technologies, Bajaj Auto, Infosys and Divis Labs.

Oil & gas, metal, FMCG, power, realty and PSU Bank indices fell 1-2 percent.

BSE midcap and smallcap indices shed nearly 2 percent each.

"RIL is our top pick and we expect it continue outperforming broader markets (stock price up 9% in 2022 versus -7% for Sensex) as we see continued recovery in its earnings led by cyclical uptick in O2C margins, further telecom tariff hikes, high growth in retail led by market share gain and ramp-up of new revenue streams (broadband services and new commerce).

"Strong cash flows from standalone business would help fund capex for its new energy business and potential monetisation of gasification unit through induction of strategic investor to help unlock value. Further value unlocking in digital and retail (with a likely IPO for consumer business) would add value to shareholders return over coming years.

"Hence, we maintain a Buy on RIL with an unchanged SoTP-based price target of Rs 3,050. At CMP, the stock trades at 21.2x/18.1 FY23E/FY24E EPS and 10.5x/9.1x FY23E/FY24E EV/EBITDA."

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