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The Indian stock market, represented by the Sensex and Nifty indices, is bracing for a sluggish start on July 11, potentially prolonging its downward trajectory for the third consecutive trading session. This anticipated weakness stems from renewed anxieties surrounding potential trade conflicts, fueled by fresh tariff impositions threatened by the United States President, Donald Trump. The announcement of a 35 percent tariff on Canadian imports, scheduled to take effect on August 1, and the suggestion of broader blanket duties ranging from 15 to 20 percent on a majority of trade partners, have reignited fears of a global trade war, casting a shadow over market sentiment worldwide. This protectionist stance adopted by the US administration has the potential to disrupt established trade relationships, impede economic growth, and introduce uncertainty into the global financial landscape, leading investors to adopt a more cautious approach. The ripples of this policy shift are being felt across various markets, including the Indian stock market, which is highly sensitive to global economic trends and investor sentiment.
The GIFT Nifty, an indicator of the likely opening direction of the Nifty 50 index, was trading at 25,283 around 7:55 a.m., reflecting a decline of 127 points, or 0.5 percent. This negative signal further reinforces the expectation of a weak opening for the Indian stock market. The previous trading session witnessed downward pressure on equity indices, exacerbated by the heightened volatility typically associated with the weekly derivatives expiry. The Nifty IT index emerged as the primary drag on the market, with prominent companies such as Infosys, Wipro, TCS, and Tech Mahindra experiencing declines. Analysts have cautioned that the IT sector may face a subdued earnings season, adding to the concerns surrounding the market's overall performance. The information technology sector is a significant contributor to the Indian economy and a major driver of export revenue, making its performance crucial for the overall health of the stock market and investor confidence. A tepid earnings season for the IT sector could trigger further selling pressure and dampen market sentiment.
Interestingly, on July 10, both Foreign Portfolio Investors (FPIs) and domestic institutional investors (DIIs) were net buyers in the Indian equity market. DIIs net bought Rs 221 crore worth of Indian equities, while FPIs net bought Rs 591 crore, according to provisional data from the National Stock Exchange (NSE). However, despite this net buying activity, the overall market sentiment remains cautious due to the external factors and the uncertainties surrounding the global trade environment. The technical levels to watch out for in the trading session are crucial for understanding the market's potential trajectory. The 25,300 level is now considered a critical make-or-break point for the Nifty 50 index. A sustained close below this level could further weaken the chart structure, indicating a potential for further downside. Conversely, the 25,550–25,600 zone continues to act as a significant resistance area, attracting selling pressure and hindering any sustainable upward movement. To establish a bullish trend, the index needs to convincingly breach this resistance zone.
Furthermore, there is evidence that Foreign Portfolio Investors (FPIs) are aggressively increasing their short positions in index futures, signaling a cautious stance from institutional participants. This indicates that institutional investors are anticipating a potential decline in the market and are positioning themselves to profit from such a downturn. Until there is evidence of short covering, where FPIs reduce their short positions, or a buildup of long positions, which would indicate a more bullish outlook, upside momentum is expected to remain limited. The market's overall direction will likely be influenced by the actions and sentiments of these major institutional players.
Dhupesh Dhameja of SAMCO Securities highlights the formation of a firm hurdle near 57,350 on the Sensex, where selling pressure has consistently emerged. He suggests that unless the index manages to close above this resistance zone, a sustained bullish reversal appears unlikely. This underscores the importance of key resistance levels in determining the market's future direction. Dhameja's analysis emphasizes that overcoming the resistance at 57,350 is crucial for the Sensex to break out of its current consolidation phase and establish a more positive trend.
Further elaborating on the technical analysis, the price action remains indecisive, oscillating between the 10-day and 20-day Exponential Moving Averages (EMAs). The index continues to consolidate within a narrow 500-point band, ranging from 56,800 to 57,300, reflecting the current lack of strong directional conviction. Muted institutional participation further contributes to the indecisiveness in the market. A close below the key support level at 56,770 could weaken the market structure further, potentially leading to a more significant decline. Conversely, a sustained move above 57,350 is needed to signal strength and a potential for further upside. The fact that FPIs have been consistently short on index futures adds to the cautious outlook, indicating persistent supply pressure at higher levels.
The India VIX, a measure of market volatility, slipped 2.24 percent to close at 11.67, remaining well below the psychological mark of 15. This low-volatility regime suggests that investors are not experiencing a high level of fear or uncertainty, and it favors a slow, grinding market rather than volatile price swings. However, it also reflects indecision and a lack of strong directional conviction. The low volatility could be a sign of complacency, as investors may be underestimating the potential risks associated with the global trade environment and other economic factors. While low volatility can be beneficial for certain trading strategies, it can also mask underlying vulnerabilities in the market.
The Put-Call Ratio (PCR), a measure of the ratio of put options to call options, remained steady at 0.69. This indicates a bearish tilt in the market, primarily due to elevated call writing. Call options are typically bought when investors expect the price of an asset to increase, while put options are bought when they expect the price to decrease. A higher volume of call writing suggests that investors are anticipating a potential decline in the market or are hedging their existing long positions. The PCR is a useful indicator of market sentiment and can provide insights into the potential direction of future price movements. A PCR below 1 typically indicates a bearish sentiment, while a PCR above 1 indicates a bullish sentiment.
In conclusion, the Indian stock market is facing headwinds due to renewed concerns about global trade tensions and the potential impact of US tariff policies. While both FPIs and DIIs were net buyers in the previous session, the overall market sentiment remains cautious due to the external factors and the uncertainties surrounding the global trade environment. The technical levels to watch out for are crucial for understanding the market's potential trajectory. The 25,300 level is now considered a critical make-or-break point for the Nifty 50 index. A sustained close below this level could further weaken the chart structure, indicating a potential for further downside. Conversely, the 25,550–25,600 zone continues to act as a significant resistance area, attracting selling pressure and hindering any sustainable upward movement. To establish a bullish trend, the index needs to convincingly breach this resistance zone. Investors should exercise caution and closely monitor market developments, including the actions of FPIs and the performance of key sectors such as IT. The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Source: Sensex, Nifty eye weak start as Trump tariff jitters resurface; key levels to track on July 11