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Ahead of Market: 12 things that will decide stock action on Wednesday

MUMBAI: Nifty50 formed a lower top formation on the daily chart on Tuesday, which analysts suggested was negative for the bulls.

Here’s how analysts read the market pulse:

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said Heated selling in banking, oil & gas and realty stocks weighed heavily on benchmark indices as higher inflation remains a key concern for markets.

Mazhar Mohammad of said Nifty50 seems to be in a consolidation mode as it is alternating between positive and negative candles without any clear cut direction. However, close observations of the last 11 trading sessions reveal that Nifty50 is making a channelled move.

That said, here’s a look at what some of the key indicators are suggesting for Wednesday’s action:

Wall Street rises on retail optimism

Consumer stocks drove the S&P 500 and the Dow higher on Tuesday as Walmart forecast a strong holiday quarter and monthly retail sales beat expectations, while losses in major technology stocks held back gains on the Nasdaq. At 10:01 a.m. ET, the Dow Jones Industrial Average was up 171.63 points, or 0.48 per cent, at 36,259.08, the S&P 500 was up 14.42 points, or 0.31 per cent, at 4,697.22. The Nasdaq Composite was up 31.58 points, or 0.20 per cent, at 15,885.42.

European stocks notch all-time highs

Several European stock indices hit record highs on Tuesday, boosted by strong corporate earnings, dovish statements from the European Central Bank chief and signs of easing U.S.-China tensions. The pan-European STOXX 600 rose 0.28 per cent, extending a record-breaking run as investors saw a key meeting between U.S. President Joe Biden and Chinese leader Xi Jinping as a sign of improvement in the fraught relationship.

Tech View: Consolidate to continue

Analysts suggested that the Nifty50 index could consolidate going ahead as selling pressure remains intact. For day traders, 18,060 would be the immediate resistance level, and if the index slips below the same the correction wave could continue up to 17,900-17,830 levels.

F&O: Selling may exacerbate

In the derivatives segment, traders aggressively bought out-of-money put options of the Nifty50 index indicating that they expect more selling pressure ahead. The short covering in 17,900 strike price put option indicated that traders expect the index to test that level going ahead.

Stocks showing bullish bias

Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade setup on the counters of NHPC, Chambal Fert, Mahindra CIE, Future Retail, and Indus Towers.

The MACD is known for signaling trend reversals in traded securities or indices. When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Stocks signalling weakness ahead

The MACD showed bearish signs on the counters of Ashok Leyland, Canara Bank, J&K Bank, Bombay Dyeing, and Navkar Corp. A bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms

Tata Motors (Rs 2904 crore), Maruti Suzuki (Rs 2081 crore), PB Fintech (Rs 1952 crore), Zomato (Rs 1765 crore), Tata Steel (Rs 1529 crore), RIL (Rs 1327 crore), HDFC (Rs 1262 crore), Tata Power (Rs 1172 crore), Infosys (Rs 1085 crore) and Zee Entertainment (Rs 1071 crore) were among the most active stocks on Dalal Street in value terms. Higher activity on a counter in value terms can help identify the counters with the highest trading turnovers in the day.

Most active stocks in volume terms

Vodafone Idea (Shares traded: 12.9 crore), Zomato (Shares traded: 10.9 crore), Suzlon Energy (Shares traded: 6.0 crore), YES Bank (Shares traded: 5.8 crore), Tata Motors (Shares traded: 5.6 crore), Tata Power (Shares traded: 4.8 crore), Trident (Shares traded: 4.5 crore), Ashok Leyland (Shares traded: 4.1 crore), and PNB (Shares traded: 3.7 crore) were among the most traded stocks in the session.

Stocks showing buying interest

PB Fintech, Macrotech Developers, Thermax, Finolex Cables, Suprajit Engineering and Mahindra CIE witnessed strong buying interest from market participants as they scaled their fresh 52-week highs, signaling bullish sentiment.

Stocks seeing selling pressure

Aditya Birla Sun Life AMC, Aegis Logistics, and P&G Health witnessed strong selling pressure and hit their 52-week lows, signaling bearish sentiment on these counters.

Sentiment meter favours bears

Overall, the market breadth remained in favour of the bears. As many as 205 stocks on the BSE500 index settled the day in the green, while 295 settled the day in the red.

Podcast: What led to late the sell-off on Monday?
Domestic equity markets were back in the red on Tuesday, thanks to the fag-end selling. Bears took over Dalal Street as inflation worries spooked traders. Also, the negative commentary of pricey equity valuations from RBI made sentiments jittery, whereas global cues lent support to buying. Barring auto and IT stocks, all other sectors disappointed, especially banking and pharma. What were the reasons behind the sharp sell-off in the last few minutes?

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