Market Update

NIFTY DAILY CHART

SUPPORT: 22250-21700 RESISTANCE: 23400,24000

The Nifty bounces to 23300 from low of 22475 on the Trump’s statement over efforts of agreement with Iran to reach a diplomatic solution and not attack Iran’s energy grid tup to 5 days from earlier 48 hour deadline. Understand Iran is constantly denying such agreement and poking US about defeat.

For now lets assume the war has ended, what follows next?

Technically, the markets were oversold and hence bounced by 4% in last 2 days, no more oversold on micro-structure but still oversold on weekly chart, more bounce incoming?

A falling range resistance for Nifty is seen at 23400 on hourly chart, a decisive breach above it may lead to broader recovery upto 24000-24250 levels, while a 38.2% retracement levels for the entire fall is seen at 23950 level.
We are into monthly expiry with short week, which means Rollover of positions and short covering, this also leads to un-decisiveness and premium erosions in the market and breakouts to fail.

Now, lets look at Post-War Immediate Scenario:

1. World receives Oil & Gas supply that is afloat giving immediate relief, while the actual production takes time and remains slow keeping price of energy basket elevated, for India that stands $143/bbl.

2. Restarting production requires investment and time, hitting world with inflation shock in already weak consumption environment.

3. Private Credit & Funding Crisis accelerates due to larger demand disruption by human psychology to be conservative and save money.

4. All this hurts global corporate earnings, meanwhile today we stand on the highest number of loss making & cash burning companies due to Startup Frenzy.

5. Highest ever investment in stock market by retail investors across the world, means world is already invested.

So what happens once economic reality kicks in? will markets still cheer at such lofty valuations?

Time to understand what is really happening on the War front?

• Iran categorically denies and tells Trump is lying and has set terms that US will find very hard to accept, its not future war but payments for the damage?
• Iraq & Yemen declares to enter war against US
• US prepares for Boots on the Ground, that is not pivot but End-Game to a Regional Escalation to long standing war.
• Kuwait issues Nuclear safety warnings
• Israel prepares to call reserve troops, US raised enlistment age to 42 amid war
• UAE, Saudi, Bahrin, shows readines to join US side

Unless clarity from Iran official comes or there is a signed agreement we do not see it as End, The Stock market however is different and may bonce due to oversold levels, time to be alert and look for the reversal confirmation before trading on the either side, Support for Nifty is seen at 22250-21700, below 21700 expect selling activity to intensify, TILL 21700 IS NOT BREACHED EXPECT RANGE BOUND ACTIVITY FROM 24000-22500.

Read full of Analysis of Nifty50 here for broader view.

Tradzo maintains cautious view due to global macro-economic scenarios and advice to reduce weak long positions due to valuation concerns and downside risks.

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Tradzo Research
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