Indian benchmark indices are currently in a cautious phase with technical signals gaining prominence, according to market expert Ajit Nayak from HDFC Securities. The India VIX has revisited an important support zone at 17.25 level, which previously marked the breakout point that led to a rally till 29 level. As per Nayak, the interplay between VIX and Nifty will determine the next move, with a break above the 17.29 level on VIX potentially signaling consolidation rather than a price-wise correction. However, a spike in volatility could change the narrative, with the VIX moving above 20 level and similar OI data building up at the call side posing risks for the market.
According to Kotak Institutional Equities, Indian equities are likely to react positively in the near term following exit polls that suggest electoral continuity. The brokerage noted that while incumbents are projected to retain power in several regions, including Assam and Puducherry, and alliances like the DMK+ and UDF are expected to hold ground in Tamil Nadu and Kerala, respectively. However, Kotak emphasized that any positive sentiment from political stability is likely to be short-lived, as market focus quickly shifts back to more pressing concerns such as elevated crude oil prices, inflation risks, and broader macroeconomic headwinds. The brokerage expects the government to firmly focus on managing India's weakening macro environment, amid elevated crude oil prices, risks to food inflation from a sub-par monsoon and a widening current account deficit.
Market expert Ajit Nayak from HDFC Securities suggests a hedged approach with specific stock picks amid current uncertainty. His first pick is Hindalco, noting bearishness developing on the chart with clear negative divergence on weekly timeframe, while broader weakness is evident in the metals space. On the positive side, he recommends Adani Ports citing a fantastic chart pattern with a deep cup pattern sustaining above 1600 mark, even showing resilience during market weakness. Regarding PSU banks, Nayak advises patience, suggesting that while monthly charts show positive patterns, the steep rally angle warrants consolidation before aggressive buying. He recommends waiting for four to five weeks of consolidation before considering PSU stocks for long positions.
According to Kotak, the government enters a relatively election-free corridor of 10 months, providing an opportunity for policymakers to prioritize economic management and reforms. The brokerage expects policymakers to now focus on rationalizing energy subsidies, accelerating trade diversification, finalising the India-US Bilateral Trade Agreement and accelerating certain slow-moving reforms. Kotak noted that markets may continue to debate more on oil versus macro-calculus, while giving a brief cheer for electoral stability. The current market phase appears to be digestion rather than distribution, with technical signals becoming more important than directional conviction as India's benchmark indices struggle to find clear trends.
