Ahead of Market: 10 things that will decide stock action on Monday

Indian equities on Friday regained some ground even though global market sentiment continued to remain mixed. Nifty at the close-ended above 19,517, up 0.7% or 135 points. Sectorally, while a majority of the indices ended in the green, Nifty PSU Bank, FMCG and Auto ended in the red. On a weekly basis, Nifty registered a loss to the tune of 0.66%.

Here's how analysts read the market pulse:
“Increased concerns over the US economy forced investors to flee in search of safe haven investments, leading to a surge in the dollar index. Nonetheless, the domestic market recovered from the impact of weak global cues, gaining support from positive domestic earnings led by IT and pharma stocks.

India's manufacturing activity remained robust, although it marginally moderated for the second consecutive month in July. On the other hand, the domestic service PMI exceeded market expectations, reaching a 13-year high, driven by a rise in new orders, particularly in international sales. Investors are awaiting the upcoming MPC meeting, where the RBI is expected to maintain its policy rates at 6.5%,” Vinod Nair, Head of Research at Geojit Financial Services, said.


“The recent fall has pulled the index below the 21-day exponential moving average (EMA) for the first time since March 29. On an immediate basis, 19,300 have acted as support. However, on the higher end, 19,566 is likely to act as a crucial resistance level. The sentiment is likely to remain weak as long as the Nifty remains below 19,566. However, a decisive move above 19,566 could take the index towards 19,700-19,750. On the other hand, a failure to move above 19,566 could trigger selling pressure,” Rupak De, Senior Technical analyst at LKP Securities, said.

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

US Markets end flat
U.S. stocks closed little changed on Thursday after a choppy trading session, as investors weighed another rise in Treasury yields with the latest batch of economic data and earnings.

The benchmark U.S. 10-year Treasury yield rose as high as 4.198% during the session, the highest since November, extending its climb from a day earlier following Fitch's downgrade of the top-tier U.S. credit rating. In late afternoon trade, the 10-year yield had dipped below 4.194.

European shares fall
European shares declined for a third straight session on Thursday, as elevated U.S. bond yields and underwhelming earnings reports dented sentiment ahead of the Bank of England's interest rate decision.

The pan-European STOXX 600 index fell 0.6% by 0715 GMT, hitting a two-week low.

The German DAX led regional losses, with Infineon down 9% after the chipmaker forecast a decline in fourth-quarter revenue as the market for semiconductors remains a mixed picture.

Tech View
A small positive candle was formed on the daily chart with minor upper and lower shadow. Technically, this pattern indicates upside bounce in the market. The Nifty has been forming a bearish pattern like lower tops and bottoms in the last 6-7 sessions and the present up move could be in line with the new lower top formation of the sequence. However, the lower top reversal needs to be confirmed. Nifty on the weekly chart formed a reasonable negative candle with upper and long lower shadow. This shows a formation of high wave type pattern at the highs, which signal the market is in a corrective mode with volatility.

Stocks showing bullish bias
Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade on the counters of Hindustan Construction Company, Thomas Cook, JK Tyre, MOIL and Motherson Sumi Wiring among others.

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 signaling weakness ahead

The MACD showed bearish signs on the counters of BHEL, Zee Entertainment, Aditya Birla Fashion, Bank of India and PGCIL among others.

Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms
Zomato (Rs 3855 crore), SBI (Rs 3074 crore), HDFC Bank (Rs 3069 crore), RIL (Rs 2858 crore) and ICICI Bank (Rs 1995 crore) were among the most active stocks on NSE in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Most active stocks in volume terms
Zomato (Shares traded: 40.57 crore), Reliance Power (Shares traded: 29.18 crore), IRFC (Shares traded: 27.43 crore), Suzlon Energy (Shares traded: 24.11 crore), and Vodafone Idea (Shares traded: 15.38 crore) and were among the most traded stocks in the session on NSE.

Stocks showing buying interest
Shares of Zomato, Lloyds Steel, Policy Bazaar and NBCC among others witnessed strong buying interest from market participants as they scaled their fresh 52-week highs, signaling bullish sentiment.

Stocks seeing selling pressure
Shares of Vedanta, Vinny Overseas, MOS Utility, Viji Finance and Rajnandini Metal among others stocks that hit their 52-week lows, signaling bearish sentiment on the counters.

Sentiment meter favours bulls
Overall, market breadth favoured bulls as 2,196 stocks ended in the green, while 1,384 names settled in the red.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)