US Elections, Fed Policies to Keep Indian Markets Volatile: Axis Direct
Axis Direct's Hemang Gor warns of continued market volatility due to US elections and central bank policies. Get the latest Nifty and Bank Nifty outlook.
The Indian equity markets are currently weathering a storm of instability, with Indian market volatility expected to persist as investors brace for a series of global triggers. According to Hemang Gor, Senior Research Analyst for Derivatives and Technical Research at Axis Direct, the combination of the upcoming US presidential elections, critical central bank decisions, and corporate earnings is keeping traders on edge.
Speaking in Mumbai, Gor analyzed the recent 4 per cent slump in benchmark indices, highlighting that the market is navigating a complex environment where stability remains elusive.
The Technical Outlook: Nifty and the 'Short-Lived' Bounce
Analyzing the current technical posture after October's sharp correction, Gor pointed out that the Put-Call Ratio (PCR) is sitting around 0.81, which is nearing oversold territory. However, he cautioned that historical data suggests any recovery might be fleeting.
"Whenever there has been a bounce back, it has only stayed for one day or maybe the next day and then it gets faded out," Gor explained.
For those tracking the Nifty, the broader trading range is currently identified as being capped between 23,000 on the upside and a support zone of 22,300 to 22,000 on the downside.
High-Stakes Triggers: US Elections and Global Banks
The market is currently reacting to several high-pressure events. Key among these are the monetary policy announcements from the Bank of Japan and the US Federal Reserve. Additionally, the market is awaiting earnings reports from domestic banking giants and global technology firms.
A significant source of anxiety is the US election scheduled for November 3. Gor noted that this political uncertainty is a primary reason why the India VIX (Volatility Index) is trading at a higher level, currently hovering near 18 per cent.
Further adding to the bearish sentiment is the positioning of Foreign Institutional Investors (FIIs), whose index futures positioning ratios remain firmly between 0.10 and 0.12, indicating a predominantly negative outlook.
Trading Strategies for Turbulent Times
To manage the risks associated with this turbulence, Gor suggested a defined-risk option strategy for traders looking to hedge their downside.
- Recommended Strategy: Buying a put spread using November 3 weekly options.
- Risk Profile: This structure caps the maximum risk at approximately Rs 6,200.
- Profit Potential: The strategy offers a potential profit of up to Rs 13,000.
Sectoral Analysis: Where to Look and Where to be Cautious
Different sectors are reacting uniquely to the current volatility:
IT, Auto, and Pharma
While IT stocks are seeing some short-covering in anticipation of earnings, the auto and pharma sectors are showing relative resilience compared to the rest of the market.
Banking and Bank Nifty
The banking sector, particularly private lenders, requires a more cautious approach. Gor suggested that for weekly positioning, traders could consider the short side for select private banking names.
Technically, Bank Nifty finds strong support at 53,000, while the range between 56,000 and 56,500 stands as a critical hurdle for any potential reversal.