Market opens with a gap-up

Mumbai, Apr 5: Weak sentiment is likely to prevail in early trades owing to correction in overnight US markets and its negative impact on most of the Asian indices. There could be sideways movement ahead of the RBI announcement on monetary policy and banking stocks are likely to be in the spotlight.

“While interest rates are likely to remain unchanged in view of stubborn inflation, the street will be eyeing RBI Governor Shaktikanta Das commentary. Commanding attention will also be the US nonfarm payrolls report to be released in the overnight trades today, the Federal Reserve’s rate cut hopes primarily rest on this jobs report,”says Prashanth Tapse, Senior VP (Research), Mehta Equities.

On Thursday, the benchmark indices experienced a highly volatile trading session. Despite a roller coaster activity throughout the day, the Sensex was up by 351 points.

Private Banks and IT indices rallied over 1%, whereas the Oil and Gas index was the top loser, shedding over 1%.

“From a technical standpoint, the market opened with a gap-up, but then experienced a sharp intraday correction,” says Shrikant Chouhan, Head Equity Research, Kotak Securities.

However, it managed to trim some losses in the second half and eventually closed at 74228 points higher. Currently, the market is witnessing non-directional activity, taking support near 73500-73300 and facing selling pressure near 74400-74600.

For the bulls, 74400 and 74600 would act as key resistance areas. After the dismissal of 74600, the market could rally up to 75000-75500. On the flip side, below 73500, the market could retest the level of 73300-73100.

For the day, 47800-47700 would be the support zone, and resistance could be at 48350 and 48600 levels.

Some headwinds which have the potential to impact equity markets have emerged. One is geopolitical: the Iran-Israel skirmishes. The second is the concern that the rate cut expected from the Fed can be lower than three and that the first cut may come only in October.

“The US jobs data to be released today will throw more light on this. The Middle East skirmishes have pushed up Brent crude to $91 and if oil continues to rise that can pose macro headwinds for India” says Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

It is possible that the exuberant Indian investors DIIs flush with money may ignore the headwinds buy the dips imparting resilience to the market.

Amidst market weakness, banking stocks provide opportunities to buy. Data regarding deposit and loan growth from banking majors, particularly HDFC Bank are positive. Small finance banks data also indicate a healthy trend.