SWORD ON THE EDGE NOW ANY MOVE ABOVE 23850 COULD NOW TRIGGER A TREND REVERSAL

Dated: 08/02/2025

It has been nearly 11 day’s since Nifty somehow given hints of bottom formation within the range of multi-year crucial support levels of 22600-22800 as Nifty surged nearly 1000 points from those levels giving a surge of almost 4.40% in such short span of time. The entire peculiar move which not only came into the indices but also into the broader markets was entirely depended on the recovery of heavy weights consisting of different sectors.

Major role for the current pull back was due to proposed increment of basic taxability of an individual (which now is reality). Though we saw the recovery but still the flaw we saw was under crossing of 23800-23850 kind of levels. The failing structure in the Nifty can only be overrules on a sustainable close above 23800-23850 which now makes it an immediate hurdle on crossing of which we could possibly get to see 24200-24250 followed by 24800-24850 kind of levels. However, the crucial supports may continue to remain within the pre-defined range of 23000-23250 followed by multi-year crucial support levels of 22600-22800.

Broader markets remain more or less stagnant last week with mere 77.80 gains on a Week on Week basis. It has been filled with lots of news let it been domestic or international & mainly positive one which has been supporting the markets but few factors which now holds on the hope for a stronger momentum ahead are:

1. Weaker Rupee but RBI buying bonds from OMO on Feb 13^th & 20^th could support Rupee

2. Poor Q2 & but now Q3 earnings of major companies are showing positive results.

3. Slowdown in the Indian growth rate in 3 quarters of FY 2024-25 but projection of RBI for the FY 2025-26 seems in line.

In all these flow’s one thing remained consistent where FII’s continued to remain on the Net sell side & doesn’t seem to stop anywhere near now but the intensity of selling has subsequently reduced. . 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. 2,64,777.15 crore combined of October, November, December & 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. 2,40,863.75 cr. since the beginning of October 2024 & in the Calendar year 2024 they have bought more than Rs. 5 Lacs cr.

However, since the Nifty’s Multi-Year crucial support levels of 22600-22700 have been working brilliantly so far but on the other side FII’s net longs stands subsequently improved from 10% to now @16.5% & which resembles near to the historic low of net long positions by the FII’s. 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 24%, 48% & followed by 67% in the coming months ahead which may take Nifty & broader markets again on the higher levels.

Recent Budget Highlights for the FY 2025-26:

  Economic Growth Forecast:

• GDP growth for FY 2025-26 projected at 6.5%.

• Focus on inclusive growth, sustainable development, and economic recovery.

 Fiscal Deficit Target:

• Fiscal deficit set at 5.8% of GDP for FY 2025-26.

 Income Tax Reforms:

• Income tax slabs to be simplified, with higher exemptions for individuals.

• Focus on reducing the burden for middle-class taxpayers.

 Infrastructure Investment:

• ₹15 lakh crore allocated for infrastructure, including roads, ports, railways, and airports.

• Strong push for smart cities and green infrastructure projects.

 Agriculture and Rural Support:

• ₹2.5 lakh crore allocated for farmers’ welfare.

• Emphasis on doubling farmers’ income through better irrigation, organic farming, and crop insurance.

 Health and Education:

• ₹2.5 lakh crore allocated for healthcare.

• Focus on improving healthcare in rural areas and expanding health insurance schemes.

• Increased allocation for education, including skill development and vocational training.

 Green Energy and Sustainability:

• Introduction of a Green Energy Fund to boost renewable energy initiatives.

• Support for electric vehicles (EVs) and carbon-neutral technologies.

 Support for MSMEs and Startups:

• Credit guarantee schemes for MSMEs (Micro, Small, and Medium Enterprises).

• Tax incentives for startups and ease of business regulations.

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

Domestic News (Mainly consists of Union Budget 2025-26 Outcomes):

• The Reserve Bank of India (RBI) reduced its benchmark interest rate by 0.25 percentage points to 6.25%, marking the first cut in nearly five years. This decision aims to stimulate economic growth amid a broad downturn and easing inflation, which stood at 5.2% in December. Despite recording the fastest GDP growth among major countries, India faces challenges such as elevated price pressures, stagnant wages, weak consumption, and poor corporate earnings. The RBI’s policy shift focuses on growth while remaining cautious of inflation and external risks.

• The RBI announced plans to permit trading in bond forwards, enabling long-term investors to manage interest rate risks more effectively. This decision responds to feedback on the need for forward contracts in government securities. Bond forwards will allow investors to purchase government securities at a future date with a pre-determined price, aiding in efficient pricing of derivatives based on bonds. Final guidelines will be released shortly.

• The RBI has postponed the implementation of three significant banking regulations, allowing lenders more time to adapt to the changes. The new rules proposed stricter standards for infrastructure project loans, required banks to reserve more funds for digital deposits, and aimed to introduce a ‘expected credit loss’ framework. These proposals had faced opposition from the federal government, concerned about their potential negative impact on credit flow and the economy. Governor Sanjay Malhotra assured that the transition would be gradual and without disruptions.

• Akasa Air, one of India’s newest airlines, is raising fresh capital from the investment offices of Wipro founder Azim Premji, Manipal Hospitals Chairman Ranjan Pai, and wealth management firm 360 ONE.

• Rupee touches fresh low of 87.55 against US dollar

International news:

• UK Financial Sector Faces Competitive Threats: Chris Cummings, CEO of the Investment Association, urged UK regulators to learn from emerging financial hubs like Saudi Arabia and Abu Dhabi, which pose a competitive threat to London’s asset management sector. He emphasized the need for innovation and supportive regulation to maintain the UK’s attractiveness for investment management.

• UK Foreign Ministry Announces £100 Million Development Finance Initiative: The UK Foreign, Commonwealth and Development Office (FCDO) announced an investment of £100 million to support companies focused on combating poverty and climate change. This funding aims to attract an additional £400 million to £600 million from private sector investments, supporting businesses in Asia, Africa, and Latin America.

• Top finance and law firms are expanding operations in the Middle East, drawn by the region’s sovereign wealth funds and favorable business environments. Notable expansions include Campbell Lutyens opening a Dubai branch, Eisler Capital and Walleye Capital moving operations to Dubai, and Marshall Wace establishing an office in Abu Dhabi.

• Former Conservative minister Alok Sharma has been appointed chair of the Transition Finance Council, aiming to position the UK as a leader in sustainable finance. The council seeks to drive investment in green industries to create jobs and stimulate economic growth.

• At the COP29 climate conference, discussions emphasized the need to reform global financial structures to effectively address the climate crisis. The conference highlighted the significant climate finance gap, especially for emerging markets requiring $2.4 trillion annually by 2030 for climate investments.

• Since taking office, World Bank President Ajay Banga has integrated climate change into the bank’s mission statement and increased financial commitments to climate-related projects. His approach emphasizes pragmatic reforms to accelerate global climate action without overhauling the bank’s traditional development agenda.

In the coming weeks ahead as the Union Budget 2025-26 became a populous budget the volatility could be minimal but the upcoming DTC (Direct Tax Code) could maintain the suspense. However, the crucial support may continue to remain at the Multi-year crucial support levels of 22600-22700 kind of levels in Nifty while any move above 23800-23850 would be considered as a freash breakout & the move could extend till 24200-24250 kind of levels & crossing of these levels would give broader markets a  permanently bullish reversal & major negative factors will perish overnight. And in no time the Nifty could scale towards 25000-25500 kind of levels in next 2 months time frame.

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. 8,852.31 cr. but here DII’s have been the buyer’s with Rs. 6,449.70 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 stagnant mostly with mere 77 points of move as compared to Week on Week basis to give a close at 23559.95. The crucial support may remain at 23000-232000 followed by the Multi-year crucial support levels of 22600-22700 kind of levels in Nifty while breakout could be confirmed on a move above 23800-23850 & from there the potential upside could be towards 24200-24250 kind of levels while the major trend reversal could happen on a close above 24250 where broader markets will permanently turn bullish & major negative factors will perish overnight. And in no time the Nifty could scale towards 25000-25500 kind of levels in next 2 months time frame. Unlike last time this time the major move could come from Banking, Consumption space & Reliance Industries could end its dry movement soon support the broader markets.

Sensex on the other hand also remain stagnant with mere change of 354.23 as compared to its subsequent last week closing to now give a close at 77860.19. In the coming week ahead the Sensex if gives a breakout above 78250 then there will be possibility of it hitting 82000-83000 will be there while crucial supports now remains at 76000-77000 kind of levels. Unlike last time this time the major move could come from Banking, Consumption space & Reliance Industries could end its dry movement soon support the broader markets.

In Bank Nifty the crucial support now remains at 48000-49000 kind of levels with potential upside could be towards 52000-52500 kind of levels where major potential upside could be supported by PSU heavy weight banks like PNB, BOB & SBI etc.

In the Nifty Financial Services the crucial supports now remains at 22300-22900 kind of levels while the potential up move could get us 24500-25000 kind of levels.

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 41000-42000 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:  23559.95
Nifty Hurdle / Immediate Target: 23800-23850 / 24200-24250 / 25000-25500 (As the case may be)
Nifty Immediate Crucial Support: 23000-23200 / 22600-22700

Sensex CMP: 77860.19
Sensex Hurdle / Immediate Target: 78250 / 82000-83000 (As the case may be)
Sensex Immediate Crucial Support: 76000-77000

Bank Nifty CMP:  50158.85
Bank Nifty Hurdle / Immediate Target: 52000-52500
Bank Nifty Immediate Crucial Support: 48000-49000

Nifty Financial CMP: 23539.75
Nifty Financial Crucial Target: 24500-25000
Nifty Financial Crucial Support: 22300-22900

Nifty IT CMP: 42921.65
Nifty IT Potential Upside: 44500-46000 / 53000 (As the case may be)
Nifty IT Crucial Supports: 41000-42000

Stock on Radar:

Large Caps:

• SBI (CMP 737.20): This large-cap PSU counter has recently posted excellent results & saw some steep profit booking afterwords. Looks like settled on a good support zone at CMP 737 with strict SL placed at 700 one can expect a potential upside towards 800-850 kind of levels in 2 months time frame.

• Tata Motors (CMP 706): This auto counter looks attractive & beneficiary of the recent rate cut by RBI. Looks good to accumulate here at CMP 706 with strict SL placed at 650 one can expect a upside towards 800-826 in no time.

• AB Capital (CMP 169): This arge cap NDFC counter could be another benfirciary of RBI rate cut & looks attractive at CMP 169 with strict SL placed at 150 one can expect a potential upside towards 200.

• Jio Financials (CMP 249): Jio Financials has recently entered into the broking business in JV with Black Rock & this is likely to be added in Nifty 50 in March 2025. Looks attractive to add here at CMP 249 with strict SL paced at 200 one can expect a potential upside of 20-25% in next 2 months time frame.

Mid-Cap:

• India Mart (CMP 2174): With budget focusing on consumptions this counter looks attractive at CMP 2174 with strict SL placed at 2000 one can expect a potential upside of 3000 in 3 months time frame.

Small & Micro-Caps:

• NDTV (CMP 142): 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 142 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
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