Pre Market Report 28-Feb-2025

Pre-Market Report Summary

Key Concepts:

• US Market Fall: Impact of Trump's tariffs on Mexico and Canada.
• Gap Down Opening: Significant drop in Nifty due to global market sentiment.
• FIA Selling: Foreign Institutional Investors selling trends and their impact.
• Downside Support: Potential support level for Nifty around 21,800.
• Technical Bounce: Anticipated rebound for shorting opportunities.
• India VIX: Volatility index, not significantly increasing despite market fall.
• Fibonacci Retracement Levels: Resistance levels at 22,800, 23,300, and 23,800.

US Market Fall and Global Impact

The US markets experienced a significant fall, described as one of the worst in 2024. This was primarily attributed to President Trump's announcement of a 25% tariff against Mexico and Canada. This tariff, initially perceived as a negotiation tactic, was confirmed to take effect from March 4th. The speaker, PR Sundar, suggests that such tariffs could lead to increased prices and inflation in the US, negatively impacting the stock market. The fall in US markets has had a ripple effect, causing most Asian markets to decline.

Indian Market Scenario

The SGX Nifty indicated a gap down opening of more than 100 points. Unlike typical scenarios where a relief rally might occur after a flat opening, the significant gap down suggests a different market dynamic. The speaker emphasizes that this is not a normal market, especially considering that Indian indices are falling while global markets are at all-time highs. He raises concerns about the potential for further decline, suggesting a 5-10% drop is highly probable given the negative sentiment.

FIA Selling Data

Yesterday's FIA (Foreign Institutional Investors) selling amounted to approximately ₹500 crore, the lowest in the last month. Despite lower selling figures compared to previous days with ₹1,000-2,000 crore sales, the market is still opening with a significant gap down. This is attributed to the overriding influence of global market trends.

Downside Support and Market Sentiment

The speaker notes the absence of India-specific negative news, with the RBI's actions being generally positive. The primary driver for the market's decline is the global market sentiment. He suggests a potential downside support level around 21,800, which marks the starting point before the previous budget. He points out that while the government is implementing small positive measures, they are not effectively boosting the market, as every positive news is followed by a market decline.

RBI Measures and Sectoral Performance

The RBI's measure of reducing risk weightage for banks' loans to NBFCs (Non-Banking Financial Companies) positively impacted banking and financial stocks. Without this measure, the Nifty might have closed below 22,500 yesterday. However, with the SGX Nifty indicating an opening around 22,400, the Nifty has fallen approximately 3,900 points from its high of 26,300.

Market Trend and Cautionary Stance

The market has been in a continuous decline for five months, and the start of the sixth month does not look promising. The speaker advises caution, a stance maintained for the past one and a half months. While many technical analysts anticipate a technical bounce, the speaker notes that there hasn't been a meaningful rally, with the Nifty failing to reach 22,800, a level where shorting could be considered. The reluctance to short at lower levels is keeping the India VIX (volatility index) from significantly increasing.

US Inflation Data and Market Volatility

The speaker mentions that US markets tend to be volatile, and upcoming inflation data could significantly influence their reaction. The outcome of this data is uncertain.

Resistance Levels for March

The speaker identifies three resistance levels for March: 22,800 (previous support), 23,300 (50% Fibonacci retracement), and 23,800 (100% Fibonacci retracement).

Conclusion

The pre-market report paints a cautious picture of the Indian stock market, heavily influenced by negative global cues, particularly the US market's reaction to tariffs. Despite some positive domestic factors, the overall sentiment remains bearish, with potential for further decline. The speaker advises caution and highlights key resistance levels to watch for in the coming month.