Bulls remained in control of D-Street in October and pushed benchmark indices above crucial resistance levels, but the rise in COVID cases across the globe, as well as uncertainty around the US elections, capped the upside.
The S&P BSE Sensex rose above 4 percent while the Nifty50 rallied 3.5 percent in October compared to 1.3 percent rise seen in the S&P BSE Midcap index, and 0.14 percent gain seen in the S&P BSE Smallcap index in the same period.
As many as 55 stocks in the S&P BSE 500 index rallied 10-70% in October. These include Can Fin Homes, ICICI Bank, IndusInd Bank, Asian Paints, JSW Steel, Kotak Mahindra Bank, Dr Lal PathLabs, and Just Dial among others.
The month of October gave bulls the upper hand as the index managed to climb crucial resistance levels. Selling seen towards the close of the month should not be considered as a trend reversal.
The October month started on an optimistic note with a gap-up opening. The first half of the month saw a swift up move in Nifty and this time, the BankNifty too joined the momentum to lead the market to its seven-month highs.
“The second half turned out to be a bit volatile owing to the increase in volatility in global markets. This was mainly due to the surge in COVID-19 cases in Europe due to which Germany and France announced fresh lockdown measures,” Ruchit Jain, Senior Analyst - Technical and Derivatives, Angel Broking Ltd told Moneycontrol.
“Also, uncertainty ahead of the US Elections led to a rise in volatility and thus the broader markets witnessed relative underperformance,” he said.
Jain further added that although we gave up some of the gains in the latter half of the month, the indices are still trading above its crucial support of 11,550-11,600. Hence, the trend has not been distorted yet.
What lies ahead?
On a weekly basis, benchmark indices suffered a loss of more than 2 percent each while the small & midcaps outperformed.
The uncertainty around upcoming US elections, as well as the rise in lockdown due to COVID cases, has turned FIIs into net sellers in the cash segment of Indian equity markets for the past three sessions.
“Global markets, as well as domestic markets, were caught on the back foot on news of stringent lockdowns in Germany and France due to rising COVID cases and uncertainty due to US elections,” Nirali Shah, Senior Research Analyst, Samco Securities told Moneycontrol.
“Sentiments took a U-turn mid-week and markets turned from neutral to negative. All eyes are on the coming week as elections draw closer,” he said.
Will Nifty hit 12,000 in November series?
The Nifty has retraced the recent up move from 11,790 to 12,025 by 38.2 percent. Thus, 11,550-11,600 would be seen as an important support for the coming week, suggest experts.
If this support range is breached, then we would see further correction upto 11,400. On the flipside, 11,800 followed by 12,000 are the short-term resistance for Nifty, experts said.
“The rollover from October series to November in Nifty was slightly higher than the 3-month average. However, FII’s have more shorts in the index futures segment at the start of the new series,” said Jain.
Given the elections, how FII’s build-up further positions in the next few sessions would be crucial to determine the near-term trend.
“If the index manages to hold its support of 11,550-11,600 and FII’s start covering their shorts and form longs, then we could see Nifty reclaiming the 12,000 mark in the coming series,” explains Jain.
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