Week Ahead

Who would have predicted the dramatic events of June 2024 just a month ago? The month felt like a wild roller coaster for both bulls and bears on D-Street. A somewhat disappointing outcome for the BJP led to a staggering drop of over 2,000 points in a single session on the Nifty 50. After hitting an all-time high above the 23,300 mark, the Nifty 50 plunged to 21,281 on the day the results were announced. However, under the leadership of Prime Minister Modi, the BJP managed to form a government, which bolstered market sentiment. Consequently, the bulls took charge, driving the Nifty 50 to a new milestone of 24,000. Overall, the index gained over 6 percent during the month.

From a technical perspective, the Nifty confirmed a breakout from the rising channel that had been respected for many months. The theoretical target of this breakout was between 24,200 and 24,400, and the index peaked close to the 24,200 mark. In recent weeks, we observed significant index management in the domestic markets, with a few stocks driving the benchmarks while the broader markets consolidated. Even on Friday, the index surrendered all its gains and closed flat near the 24,000 mark, forming a reversal candlestick pattern. The FIIs long-short ratio in index futures reached over 80 percent, the highest in months. This indicates extremely heavy bullish positions, suggesting a possibility of substantial profit booking in the coming weeks.

We advise traders to book their short-term long positions. On the downside, the 23,900 – 23,600 zone might provide immediate support in the coming sessions, but even a dip of a few hundred points in the Nifty could be damaging for individual stocks. A move above 24,400 might extend the rally to much higher levels, but even in that scenario, it is advisable to book full profits.