Although the link between voter turnout and election outcomes is not straightforward, the drop in voter turnout has introduced an element of uncertainty that has reverberated through the Indian market in May.
Amid this backdrop, both the Nifty 50 and Sensex are set to finish May with mild gains, ranging between 0.50% and 0.60%. Despite breaking record highs four times in May, the indices couldn’t sustain these levels due to heightened volatility.
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As the seventh phase of the general election concludes on June 1, attention will shift to the exit polls, which will be released on the same day, just two days before the final results. Investors and market participants are keenly watching these developments, anticipating their potential impact on market dynamics.
Amidst anticipated volatility after the election results, domestic brokerage firm Motilal Oswal has delineated crucial Nifty 50 levels to monitor in June. It asserts that the Indian equity market is poised to experience a knee-jerk reaction following the outcome of the exit poll on June 1st, 2024, and the final result on June 4th, 2024.
The brokerage noted that the index drifted to 21,821 in May but managed a remarkable recovery, reaching a new all-time high of 23,110. Despite the heightened volatility, with the index fluctuating between 21,821 and 23,110, it finally settled near 22,600.
“According to the daily chart, the index has been moving within a rising channel formed by connecting swing highs of 22,215, 22,525, 22,775, and 23,110. Recently, it encountered resistance at the upper band of the channel but maintained its 50-day Exponential Moving Average (DEMA),” said the brokerage.
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Technically, the Nifty has formed a high wave doji pattern just before this significant event. This price pattern indicates a tug-of-war between bulls and bears, yet declines are being bought smartly despite the absence of follow-up activities at higher levels.
Overall, as long as the Nifty holds above 21,821, the brokerage expects the bullish trend to remain intact, with immediate support near 22,222 and 22,000, aiming for an upside move towards 23,310, signifying a potential new all-time high for the index, with further optimism projecting an upward trajectory towards the 23,500 level.
Bank Nifty: The brokerage noted that the index has formed an inside bar on a monthly scale, trading within the range of the previous month. On a monthly basis, it is down and has underperformed the Nifty index. However, a buy-on-declines strategy has been observed as the index recovered sharply from 47,000 to 49,688 during the month.
The index has been moving in a rising channel for the past eighteen weeks, connecting swing lows of 44,429, 45,828, and 46,983. On a daily scale, the index has been consolidating within a broader range between 48,250 and 49,500, maintaining levels above its 50-day Exponential Moving Average (DEMA) with some stock-specific activity.
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The brokerage highlighted that in July and September 2023, the index witnessed resistance near the 46,300 zones. In December 2023, January 2024, and March 2024, it established a base around the 44,444 zones. Recent price observations suggest a major shift in support to the 46,300–46,500 zones, which is expected to hold up against any potential market volatility, said the brokerage.
“A decisive hold above 49250–49500 zones could commence the next leg of the rally towards 51000–51500 zones. Bank Nifty is trading near 48600 zones, and At The Money Weekly Straddle (June 5, 24), Weekly 48600 Call and 48600 Put is trading at a net premium of around 1900 points, giving a broader range of 46500 to 50500 levels.”
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“As per the data and price study, the broader range for the index seems to be in between 46300 to 51000 zones, and we need to deploy the strategies accordingly to capture the range,” said the brokerage.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 31 May 2024, 12:22 PM IST
