Indian stock markets, led by the Nifty 50, are likely to experience a negative start to the week on Monday, December 2, as indicated by early signals from the Gift Nifty, which was trading at a 63-point discount from the Nifty futures’ previous close. A combination of disappointing economic data, continued foreign capital outflows, and caution ahead of the Reserve Bank of India (RBI) policy meeting is weighing heavily on market sentiment.
Economic Data and Foreign Outflows Dampening Market Outlook
One of the key concerns for investors is India’s Q2 GDP growth, which came in at 5.4%, marking the lowest growth rate in nearly two years. This disappointing figure raised fears that the Indian economy is losing momentum, and the growth slowdown could have a longer-lasting impact on corporate earnings. The weak GDP data has added to the growing list of concerns, including signs of a domestic economic slowdown, continued foreign capital outflows, and global geopolitical uncertainties.
The ongoing capital outflows from foreign institutional investors (FIIs) have also been a major drag on the market. As of late, India has been experiencing a net outflow of foreign investments, a trend that has been exacerbated by the uncertainty surrounding global markets and the domestic macroeconomic environment. This continued withdrawal of foreign capital has been further intensifying downward pressure on stock indices, particularly on the Nifty 50.
Nifty 50 Technical Outlook: Struggling for Momentum
Technically, the Nifty 50 index had shown some signs of recovery last Friday, rising by about 1% and reclaiming the support of the 21-day exponential moving average (DEMA). This price action, coupled with the formation of a green candle, suggested that there could be some short-term strength in the index. However, market participants remain cautious as they continue to grapple with several headwinds, including weak earnings growth, economic slowdown, and external uncertainties.
Tejas Shah, Technical Research Analyst at JM Financial & BlinkX, pointed out that a decisive close above the 24,350 mark would signal further strength in the Nifty 50. On the other hand, if the index fails to break above this level, consolidation in the range of 24,000 to 24,350 could persist in the near term.
Key support levels for the Nifty are seen at 24,000 and 23,750-800. On the upside, the immediate resistance is at 24,350, with the next resistance zone falling between 24,500 and 24,550. According to Shah, whether the Nifty can break above the crucial 24,350 level or not will be critical in determining the market’s near-term direction.
Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd., echoed similar sentiments, highlighting that the index faces an immediate resistance near 24,350-24,360 levels. The 21-DEMA at 24,080 is expected to provide immediate support, followed by 23,570, which coincides with the 200-DEMA.
As long as the Nifty remains below the 24,360 level, Yedve recommended that traders consider booking profits on any upward movement and wait for a fresh breakout before committing new positions.
Bank Nifty: Relative Strength Amidst Uncertainty
In contrast to the Nifty 50, the Bank Nifty index has been showing relatively stronger technical structure. It is holding above the psychological support level of 52,000 on a closing basis, which has provided some stability to the broader market. Shah observed that the Bank Nifty’s downside support lies at 51,750 and between 51,400-500, while resistance is positioned at 52,500-600 and further at 53,500-700.
On the downside, the 21-DEMA at 51,540 will act as immediate support for the Bank Nifty. Yedve noted that the Bank Nifty formed an insider bar candle on the daily chart and a Doji candle on the weekly chart, suggesting uncertainty. Strong resistance lies near the 52,500-52,600 zone, and traders are advised to book profits on any upward bounce and await a sustained breakout above the 52,600 level.
