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Stock market guide for May 27: FIIs cut shorts, Sensex rejig; Gift Nifty

All you need to know before the market opens on Monday: Markets in the Asia-Pacific region were seen trading with a positive bias; FIIs were net buyers last week. Adani Ports to be part of Sensex 30.

BSE500 headline P/E declines, but value of most companies rises

Rex Cano Mumbai
Pre-market update for Indian stock markets Monday May 27, 2024: The Sensex and the Nifty are likely to start trade for this penultimate week, prior to the Lok Sabha election results on June 04, on a quiet note hinted global cues.

Last week, the NSE Nifty topped the 23,000-mark for the first time ever and hit a new summit at 23,026. The S&P BSE Sensex too registered a new all-time high at 75,636.

At 07:00 AM, Gift Nifty futures quoted around 23,026, suggesting a likely flat to mildly positive start for the Nifty 50 index.

FII action in focus

In spite of being aggressive sellers so far in May, FIIs turned out to be net buyers of stocks worth Rs 1,166 crore last week. For the month, they are net sellers of shares to the tune of Rs 34,460 so far.

Commenting on the FII trading activity, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services in a note said this heavy selling was triggered by the massive outperformance of Chinese stocks.  The valuation of Hang Seng had crashed to a PE multiple of around 9 prompting FII buying, triggering ‘ Sell India, Buy China trade.’

The election-related jitters, too, might have influenced FII selling. However, now that the base case scenario appears to be a clear verdict in favour of BJP/NDA. The FII’s massive selling has ceased and they have even turned buyers in recent days. Going forward, as clarity emerges on the election front, FIIs are likely to buy in India since they cannot afford to miss the post-election results rally. Actually, the rally may begin even before the election results, the note stated.

Similarly, in the derivatives segment, data shows that the FIIs have significantly reduced their short positions in the last two trading sessions. From being net short up to 69.2 per cent in the index futures, FIIs now hold 51.3 per cent short positions in the index futures.

Global mood

On Friday, the US market ended on a high note as a tech-driven rally took a breather amid lingering concerns over the likely timing of the interest rate cut in the US. 

This morning, in the Asia-Pacific region, Taiwan rallied 1 per cent. Kospi and the Australian indices held gains of around 0.5 per cent each, while Japan’s Nikkei was up marginally.

Among commodities, Gold futures rose to $2,363 levels, while Brent Crude Oil traded on a steady note around $82 per barrel. The 10-year US bond yield quoted around 4.447 per cent.

Stocks in focus on Sensex, FTSE World rejig

Shares of Adani Group are likely to be in focus after the BSE Sensex in its semi-annual revision included the Gautam Adani firm in the Sensex 30, replacing Wipro with effect from June 24.

Analysts at Nuvama Alternative & Quantitative Research believe that Adani Ports could be assigned a weightage of 1.2 per cent in the Sensex. The inclusion will result in inflows of nearly Rs 2,100 crore in Adani Ports, while Wipro could see selling to the tune of Rs 1,400 crore.

That apart, the board of directors of Adani Energy Solutions and Adani Enterprises are scheduled to meet on Monday and Tuesday, respectively, to consider fund raise proposals.

Shares of Indian Renewable Energy Development Agency (Ireda), JSW Infrastructure and Tata Technologies will be in the limelight today following their addition to the FTSE World index.

Trading strategy for Monday, May 27 - Should you be a buyer or seller today? Here’s what market experts recommend:

Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities

The 22,500, 22,700 & 22,800 Nifty option Strikes saw call writers exiting and put writers entry, which kept the Nifty steady on Friday. Significant put writing was observed at the 23,000 Strike in Nifty. The put writers mounted a massive challenge on the call writers at the 23,000 Strike and the option activity at this strike will provide cues about Nifty’s future direction. 

The Bank Nifty 48,500 Strike saw call writers exiting and put writers. Strong put writing was also observed at the 48,800 & 49,000 Strikes in Bank Nifty. The call writers have sizeable positions at the 49,000 Strike and the option activity at this strike will provide cues about Bank Nifty’s future direction.

Om Mehra, Technical Analyst, SAMCO Securities

On Friday, the Nifty ended the day with an inverted hammer candlestick pattern suggesting selling pressure from the top. The immediate support remains at 22,890, followed by 22,800. Any pullback towards the 22,900 level could present a buying opportunity for the short term.

Although the Bank Nifty breached the 49,000 level, it was unable to sustain above it. However, there are indications that it might break this resistance and move higher. The bullish sentiment in Bank Nifty was further confirmed by all hourly candles closing in the green in Friday’s session, indicating a firm grip by the bulls.

The immediate support remains at 48,600, followed by 48,500, providing a cushion in case of pullbacks. On the upside, crossing the 49,050 mark would likely lead to attempts to reach levels around 49,400-49,500.

Neeraj Sharma, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates

Technically, the Nifty has crossed the barrier of 22,800 and managed to sustain above it on a weekly basis, suggesting strength. Thus, as long as the index holds above 22,800, we expect the rally to extend towards 23,100-23,200.

The Bank Nifty has broken the short-term resistance of 48,260 levels and managed to close above it, indicating strength. As long as the index holds above 48,000 levels, we expect it to test the levels of 49,500. Thus, a buy-on-dips approach should be adopted in Bank Nifty.”

Rajesh Bhosale, Technical Analyst, Angel One

After oscillating within a range of 1,000 points between 21,800 and 22,800 for the last two months, the market finally witnessed a bullish breakout. In this scenario, traders should maintain a positive bias, with any dip toward the previous resistance of 22,800 likely acting as a buying opportunity.

The only concern is the benchmark index approaching the upper band of the 'Rising Channel,' which has been a turning point in recent months. This zone, around 23,100 – 23,200, should be closely watched. 

Ahead of the key election results, traders may prefer to book their long positions around this zone in anticipation of intense volatility. Therefore, the approach would be to buy on dips around 22,800 and to book profits around 23,200. Traders should monitor these levels and plan their trades accordingly.

Rupak De, Senior Technical Analyst, LKP Securities

Sentiment might remain subdued in the next few days, with the Nifty ranging between 22,950 and 23,050. Heavy call and put writing activity at 23,000 suggests a possible range-bound trade in the near term. Only a decisive fall below 22,950 might take the index towards 22,800. On the other hand, a sustained movement above 23,050 might lead to a meaningful rally.

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First Published: May 27 2024 | 7:16 AM IST

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