Bullish To Bearish: Market Sentiment Takes a Dramatic Turn

Market Synopsis:

The Indian equity market experienced a significant decline last week, undermining hopes for
strong upward momentum. This shift was driven by foreign institutional investors redirecting
their attention to the Chinese and U.S. economies in light of recent economic stimulus
measures. Additionally, on October 3rd, geopolitical tensions in the Middle East and regulatory
changes by the Securities and Exchange Board of India (SEBI) further exacerbated the
downturn. As a result, Indian markets faced substantial losses. 

The weak performance of the Indian markets was reflected across all major indices. The Nifty
50 fell by 4.62% over the week, marking its largest weekly decline since June 2022. The Nifty
Midcap 150 declined by 2.89%, while the Nifty Smallcap 100 dropped by 2.51%. 

In the previous week, crude oil futures rose by approximately 10%, reaching around $74.39 per
barrel amid concerns over oil supply disruptions from the Middle East, as India imports 51% of
its crude oil from Iraq, Israel, and Iran. Additionally, the Indian rupee depreciated against the
USD closing at ₹84, reflecting a depreciation of 0.43%. 

Market Watch:

Top Gainers

JSW Steel – 3.22%
Infosys – 0.60%
Tech Mahindra – 0.45% 

Top Losers

Reliance – 9.15%
Shriram Finance – 7.86%
Axis Bank – 7.44%

NIFTY IT: 0.26%
 NIFTY Reality: -4.36%

Major Market Developments:

● Sebi rolled out six measures to enhance the derivatives framework and protect retail
investors in F&O trading. Notable changes include increasing the minimum contract size
to Rs 15 lakhs, reducing expiries per week, and implementing an upfront options
premium collection from 2025 to curb speculative trading.
● The China Security Index 300 index rose by nearly 16% last week, and Hong Kong’s
Hang Seng was up by 13%, as investors warmed to a combined monetary and fiscal
bazooka from the authorities in Beijing. The latest stimulus package includes $114bn to
encourage companies to buy back their own shares and to provide funds for insurance
companies to buy local equities.
● Oil soars 10% in five days, logs biggest weekly gain in one year due to Israel-Iran war
although gains were limited as U.S. President Joe Biden discouraged Israel from
targeting Iranian oil facilities.
● Sebi gives in-principle nod to set up Jio Financial-BlackRock’s mutual fund business

FII/DII Net Cash data
FII, DII
04-Oct-2024 -9896.95, 8905.08
03-Oct-2024 -15243.27, 12913.96
01-Oct-2024 -5,579.35, 4,609.55
30-Sep-2024 -9791.93, 6645.80

Technical Analysis:

On September 30, 2024, the Nifty 50 opened at 26,060, following a period of upward
momentum. However, amid emerging opportunities in China’s economy, the index quickly
exhibited a downtrend, forming a bearish red hammer candlestick with a change of -192.45 in
the first hour, which drove it down to 25,822.

On October 1, the index traded sideways, indicating indecision among market participants with
no clear expectations. Following escalating global tensions and regulatory changes from SEBI
On October 3, the Nifty 50 resumed its downtrend, forming an evening star pattern that
encountered resistance around the 25,470 level.

On October 4, another bearish red hammer candlestick was formed, suggesting further
expectations of a significant downtrend ahead. If selling pressure intensifies relative to buying
activity on October 7, it could signal a continued downward trend for the week.

The Relative Strength Index (RSI) (14) was measured at 40.63, indicating a neutral stance,
while the 20-day Simple Moving Average (SMA) stood at 25,501, suggesting a sell signal.

Overall, the summary of technical indicators points towards a bearish outlook, reinforcing the
potential for further declines.