NIFTY GAVE DEAD MOVES LATELY ALL EYES ON UNION BUDGET WITH MULTI YEAR SUPPORT @22600-22700

Dated: 25/01/2025

It’s been a while since Nifty has not shown any sign or mood for an intermediate recovery in the broader markets despite the upcoming Union Budget for the FY 2025-26. It seems like this time the markets have no expectations from the budget but just a “Halwa” from the beloved Finance Minister. With no intermediate relief seen Nifty has remained under pressure despite the few technical & upcoming expected union budget support the reaction of broader markets may remain under pressure.

Earlier the expected support levels where some intermediate relief was expected was 23000-23200 but here too Nifty has failed to own any significant bounce / pull back so in the coming weeks ahead the pressure may take this towards the long term crucial support of 22600-22700 kind of levels which now remains very crucial for this to sustain & if anything positive comes up in the budget the pull back will not even stop @24000 but the potential upside could be towards 25000-25500 in next 2 months time frame while but if it fails to do so & breaks below 22600-22700 in case nothing comes up in budget or in any other circumstances then the fall could be fatal & the ongoing correction could end up towards the overall correction of 18-20% from the top of 26277.35 which may end up somewhere 21300-21500 kind of levels where the pain could exert till May 2025 & relief could only be expected from June 2025 onwards.

Though the Nifty remain remained within the range of 400-500 points range only but the portfolio remained in the bears hand where not only mid & small caps were butchered but also large caps were mercilessly beaten up. The broader markets now remained into the mercy of FII’s & with certain hopes into their pocket from the upcoming Union budget of FY 2025-26.

However, major directional flow of the entire indices still depends largely on institutional activities wherein the FII’s are still on sell side at large. FII’s have been in no mercy for the Indian domestic Equity markets as their relentless selling has been nonstop where since the beginning of the October 2024 month FII’s have done massive selling amounting to Rs. 2,46,482.60 crore combined of October, November, December & so far in wholesome of January 2025. This has lead the entire pressure on the Indian Domestic Equity Markets overall FII’s have sold nearly Rs. 3 Lacs cr. in the Calendar year 2024 while on the contrary DII’s were the main supporters of the entire Indian domestic Equity Markets with whopping buying of Rs. 2,12,216.50 cr. since the beginning of October 2024 & in the Calendar year 2024 they have bought more than Rs. 5 Lacs cr.

Since the broader markets have been witnessing no mercy from the ruthless FII’s who are expected to have been on the sell side due to following reasons:

1. Weaker Rupee

2. Poor Q2 & Q3 forecast earnings of the companies

3. Slowdown in the Indian growth rate

4. Expected higher taxation rates in the upcoming budget

Despite all above the domestic Indian Equity Markets have 3 key factors to watch-out in the coming weeks ahead:

1. Trump taking actions after taking over as a President on 20^th January 2025

2. Upcoming Union Budget 2025

3. RBI Monetary Policy Committee meeting is scheduled from February 5-7, 2025

However, this pre-news structured selling seems legit when Q2 GDP data was published last Friday where lower than estimated GDP came as “India’s GDP growth slows in Q2 FY 2024-25 to 5.40% while Fiscal Deficit at 46.50% of FY 2024-25 targets. It now looks like FII’s must have sensed earlier these possibilities of GDP slow down which lead them for a relentless selling. But now the eye’s rolled back into the soon coming Q3 GDP numbers which will be released by January 2025 end possibly.

US Federal Reserve cut interest rates by a quarter point on 14^th December 2024 and signaled a slower pace of cuts ahead, amid uncertainty about inflation and President-elect Donald Trump’s economic plans. Policymakers voted 11-to-1 to lower the US central bank’s key lending rate to between 4.25 per cent and 4.50 per cent, the Fed announced in a statement. They also penciled in just two quarter-point rate cuts for next year, and sharply hiked their inflation outlook for 2025 which intern puts additional pressure not only on Indian markets but also on US markets as well.

In the coming week we are ahead of upcoming Union Budget 2025 so the coming week could remain into highly volatile territory which could neither be into the hands of bulls nor completely into the hands of bears but majority could remain into the bears grip. However, Nifty could see now its crucial supports shifting from 23000-23200 range to now to a long term crucial support @22600-22700 range any breach below this could exert the pressure towards 21300-21500 kind of levels over next 6 months time frame shifting the entire topological changes into the broader markets while potential upside if Union Budget for FY 2025-26 gives something good then the Nifty isn’t gonna stop at 24000 the potential upside could exert towards 25000-25500 in next 2 months time frame

However, we have also clearly mentioned the expected potential upside could be supported by the FII’s net longs now stands as low as below 15-17%  which continuously signifies & has formed the bottom formation somewhere near 22600-22700 which indeed has turned the game & bottom was formed in Nifty. Now we expect the FII’s long positions to rise towards 48% followed by 67% in the coming month ahead which may take Nifty & broader markets even on the higher levels.

In the wholesome broader markets witnessed some key events & their outcomes last week which are described as follows:

Domestic News:

• India’s GDP Growth Forecast Revised: The Reserve Bank of India (RBI) recently revised its GDP growth forecast for the fiscal year 2024-25 to 6.2%, citing strong consumption demand and a boost in industrial production.

• Inflation on the Decline: India’s retail inflation has shown a steady decline, dropping below the RBI’s comfort zone of 6% in December 2024, primarily due to lower food prices. This could potentially pave the way for more interest rate cuts.

• Digital Rupee (e₹) Pilot: The Reserve Bank of India has expanded the pilot program for the Digital Rupee (e₹) in January 2025, aiming to facilitate faster and more secure transactions in the economy, as well as to bring down the cost of printing physical currency.

• Banking Sector Health: India’s banking sector continues to show resilience, with a reduction in bad loans (NPAs) reported by most major banks, boosting investor confidence. However, there are concerns over non-performing assets in smaller, regional banks.

• Corporate Earnings Beat Expectations: A number of large-cap companies, particularly in the IT, banking, and automotive sectors, have reported better-than-expected quarterly earnings. This has led to increased investor confidence, with companies like TCS, Infosys, and HDFC Bank seeing notable gains in their stock prices

• IPO Market Buzz: The IPO market in India remains active, with several high-profile companies set to go public in 2025. The upcoming IPOs of companies like Zomato (food delivery) and a few fintech firms are generating significant investor interest. Analysts expect a strong debut for these listings, with a favorable market environment for new listings.

• Reliance Industries: A major player in multiple sectors including energy, telecom, and retail, Reliance continues to draw attention due to its diversified business model and large-scale investments in green energy.

International news:

• Putin ready to talk to Trump, Kremlin says awaiting confirmation from Washington Trump said on Thursday he wanted to meet Mr. Putin as soon as possible to secure an end to the war with Ukraine

• S. President Donald Trump declares end to birthright citizenship The decision could affect thousands of Indian professionals working in the U.S. under H-1B and other temporary visas; President threatens to impose 100% tariffs on BRICS countries if they attempt to move to “non-dollar” transactions.

• Trump calls for $1 trillion Saudi investment, lower oil prices But I’ll be asking the Crown Prince, who’s a fantastic guy, to round it out to around $1 trillion, says U.S. President Donald Trump

• Trump says he plans to reach out to North Korea’s Kim Jong Un got along with him…He’s not a religious zealot, says U.S. President Donald Trump

• World Economic Forum 2025 Day 5 LIVE: Taural India signs MoU with Maharashtra Government at Davos

• Maharashtra, Tamil Nadu, A.P. Telangana on Thursday procured MoU’s and investment proposals to contribute to infrastructure development and job creation in their states

• S. arrests, deports hundreds of ‘illegal immigrants’, says Trump press chief Donald Trump promised a crackdown on illegal immigration during the election

 

The Centre’s gross tax collections (post refunds but before transfers to states), stood at Rs 4.6 trillion in the first two-months of the current financial year, 15.9% higher than the year year-ago level, data released by the Controller General of Accounts (CGA) showed on Friday. This is against 10.6% annual growth pegged in the Budget for FY25.

Net Direct tax collection Net direct tax collection rises 16.45% to Rs 15.82 trillion till 17^th December 2024 indicating a strong economy and corporate performance.

Net tax revenue (after refunds and after devolution to states) during April-May, stood at Rs 3.19 trillion, accounting for 12% of the Budget estimate of Rs 26.02 trillion. However, during the same period of FY24, net tax revenue had accounted for about 16% of the Budget target.

In the institutional segment the FII’s remained negative with net sell of Rs. 22,504.08 cr. but here DII’s have been the buyer’s with Rs. 17,577.36 cr. last week. FII’s have been brutal but history has shown whenever FII’s have shown merciless selling pressure we somehow make another bottom supported by DII’s massive buying as monthly retail SIP data surpassed Rs.26,000 cr. p.m.

Nifty last week remained into a pure taboo consolidation wherein the broad move was wiped into a move of 400-500 points’ movement entirely to give a precise closing at 23092.20. Nifty could see now it’s crucial supports shifting from 23000-23200 range to now to a long term crucial support @22600-22700 range any breach below this could exert the pressure towards 21300-21500 kind of levels over next 6 months time frame shifting the entire topological changes into the broader markets while potential upside if Union Budget for FY 2025-26 gives something good then the Nifty isn’t gonna stop at 24000 the potential upside could exert towards 25000-25500 in next 2 months time frame. This time the major potential upside could be triggered by Nifty FMCG followed by Reliance Industries in Oil & Gas space.

Sensex on the other hand too remained within the defined range of 1300-1600 points only while to give a close at 76190.46. In the coming week ahead the Sensex too could witness the lower end crucial supports of 75000 kind of levels while potential upside looks like could be towards 82000-83000 in case the budget goes in the favor while in case of a breakdown next crucial support where it an reside woud be massive downside somewhere near 70000.This time the major potential upside could be triggered by FMCG followed by Reliance Industries in Oil & Gas space.

In the Bank Nifty the crucial supports now remains at 47000-47500 range while any breakdown below could give us 44000-45000 kind of levels while on the upside if budget supports the potential upside could be towards 52000-52500 kind of levels weight in PSU heavy weight banks like PNB & SBI etc.

In the Nifty Financial Services the crucial supports 21000-21500 kind of levels while the potential up move could get us 24000-24500 kind of levels in the budget.

In “Nifty IT” we remain intact for our earlier potential upside target of 44500-46000 kind of levels with crucial supports shifting higher within the defined range of 41500-42500 kind of levels. But the broader target of 53000 could get shifted till May 2025 but remains intact. The major move may once again be supported by heavy weights like TCS, Infosys & Wipro.

Till October 2024 the number of Demat Accounts has risen to whopping 20cr. this not only helps the capital markets directly but also directly to Equity investments.

The monthly SIP in Indian markets now rose at Rs. 26,000 cr. per month.

 

Brief Levels of Nifty / Sensex/ Bank Nifty / Nifty Financials / Nifty IT:

Nifty CMP:  23092.20
Nifty Hurdle / Immediate Target: 24000-24250 / 25000-25500 (As the case may be)
Nifty Immediate Crucial Support: 22600-22700 / 21300-21500 (As the case may be)

Sensex CMP: 76190.46
Sensex Hurdle / Immediate Target: 82000-83000
Sensex Immediate Crucial Support: 75000 / 70000 (As the case may be)

Bank Nifty CMP:  48367.80
Bank Nifty Hurdle / Immediate Target: 52000-52500
Bank Nifty Immediate Crucial Support: 47000-47500 / 44000-45000 (As the case may be)

Nifty Financial CMP: 22513.50
Nifty Financial Crucial Target: 24000-24500(As the case may be)
Nifty Financial Crucial Support: 21000-21500

Nifty IT CMP: 43532.75
Nifty IT Potential Upside: 44500-46000 / 53000 (As the case may be)
Nifty IT Crucial Supports: 41500-42500

Stock on Radar:

Large Caps:

 

• IRCTC (CMP 787): This railway counter remains on radar since budget is coming up & looks good to add at CMP 787 ith strict SL placed at 738 for a potential upside towards 850-920 in no time.

• RVNL (CMP 410): Railway budget is likely to be increased in the upcoming budget so another counter into this sector is RVNL looks good to accumulate here at CMP 410 with strict SL placed at 355 one can expect a potential upside towards 500 in 2 months time frame.

• Reliance (CMP 1246): This counter again giving opportunity on dips towards 1246 with broader markets looking bullish this heavy weight giant may continue to rise from 1246 onwards the potential upside form here on wards could be around 1600 in the next 3-6mths time frame.

• LIC Housing Finance (CMP 573): This large-cap housing finance counter looks good to accumulate here at CMP is on the verge of a long term breakout retest zone at 542.50 & still looks good to accumulate here at 573 with strict SL placed at 500 for a potential upside towards 650 in 3 month’s time frame.

• NTPC Green (CMP 112): This large cap has posted excellent results looks good to accumulate here at CMP 112 with strict SL placed at 100 one can expect a potential upside towards 130 in no time frame

Small & Micro-Caps:

• NDTV (CMP 148): This is another Adani group counter has been beaten down badly but since Trump taking over charge of US as a president we may now become positive in this counter from CMP 148 with strict SL placed at 120 one can expect a potential upside towards 270 in no time.

About the Author:

Mr. Vishal Gupta a SEBI Registered Research Analyst is the founder of “VG STOCK RESEARCH”, founder of “THE ANALYSIS ROOM”, a writer & an advisor having rich experience in Indian Equity Markets who has spent years comprehending an industry wide shift and risk management with more than 12+ years exploring in depth analysis of the Equity & Derivatives with accuracy of 90% and above.

He has also been into teaching Fundamental Analysis for quite some time giving investors/traders comprehensive knowledge & skills of Indian Equity Markets.

Email I’d: contact@vgstockresearch.com
Contact: +91-9953934544
Website: https://vgstockresearch.com/
SEBI Reg. No.: INH100007985