Pre Market Report 07-Mar-2025

Key Concepts

• US Market Volatility (S&P 500, NASDAQ)
• Trump's Tariff Measures & Global Uncertainty
• Nifty Gap Closure & India VIX Behavior
• Nifty Future Premium & Short Covering
• Domestic Institutional Support vs. FII Selling
• Nifty Resistance Levels (22500, 22800, 23300, 23800)
• US Jobs Data Impact
• Profit Booking on Fridays
• Bank Nifty Underperformance
• Fibonacci Retracement Levels (22550, 21600)

Market Overview and Global Factors

The speaker, PR Sundar, begins by noting the volatility in US markets, particularly the S&P 500, which experienced significant fluctuations. NASDAQ has fallen more than 10% in the last one or two weeks. He attributes this volatility to global uncertainty, specifically mentioning "Trump weeks" referring to uncertainty caused by Trump's tariff measures with Canada and Mexico. Asian markets are also down, and SGX Nifty indicates a potential 60-70 point drop at the open.

Positive Indicators for Nifty

• Gap Closure: Nifty closed the gap created between last Thursday and Friday, recovering from a 500-point fall.
• India VIX: The India VIX was higher in a rising market, indicating significant call selling and potential trouble for short sellers if the market reverses.
• Nifty Future Premium: The Nifty future premium decreased from 150 points to 100 points at the beginning of the month, followed by a 170-point surge due to short covering. This led to a decrease in put premiums and an increase in call premiums.
• Domestic Institutional Support: Domestic institutions are consistently buying more than FIIs are selling, providing support to the market.
• Support Level: The 22,000 level is identified as a strong support.

Resistance Levels and Targets

The speaker identifies four resistance levels for Nifty: 22500, 22800, 23300, and 23800. 23800 was the February high from where the market fell more than 1,800 points. The first resistance at 22500 has already been breached.

Negative Factors and Uncertainties

• US Market Jitteriness: The US market remains volatile due to Trump's tariff issues. The S&P 500 and NASDAQ had wiped out the entire gains made by the election rally as of yesterday.
• US Jobs Data: The upcoming US jobs data is a key factor. Positive data could push markets higher, while negative data could lead to a break of the swing low.
• Friday Profit Booking: Traditionally, markets tend to experience profit booking on Fridays after a positive Monday-Thursday period.
• Stock-Specific Weakness: While the Indian market was strong, ICICI Bank, HDFC Bank, and Infosys ADRs were down in the US market, indicating negative sentiment.
• Bank Nifty Underperformance: Bank Nifty has been slightly underperforming Nifty in the last two days.

Market Consolidation and Direction

The speaker suggests that after significant moves (500 points up or down), the market should consolidate for two to three days before deciding on a direction. The last hour of trading today will be crucial in determining the market's direction. A positive close of at least 10-20 points would indicate that the "worries are over" and the next resistance at 22800 will be tested.

Long-Term Perspective and Fibonacci Retracement

The speaker highlights that Nifty is currently at a 50% Fibonacci retracement level of 22550, calculated from the rally that started in October 2023 from 19,000 to 26,300. If the market remains resilient and FII selling decreases, this level could act as a good support. Otherwise, the next Fibonacci retracement level is at 21600, which is considered a support for a longer time frame (two to three months).

Conclusion

The market is at a crucial juncture, influenced by both domestic and global factors. While domestic institutional support and short covering provide positive momentum, US market volatility and FII selling pose challenges. The US jobs data and the market's ability to hold the 22550 Fibonacci level will be key determinants of future direction. The speaker advises traders to create positions based on these factors and the longer-term support level of 21600.