Pre-Market Insights Tuesday: Top factors before the opening bell

On August 28, the stock market exhibited a healthy rebound following two days of correction, coupled with consolidation. Despite the bounce back, experts remain cautious about its sustainability, although it aligns with the expected pattern formation on the weekly charts, characterized by an Inverted Hammer formation. This pattern suggests that the market might engage in range-bound trading until the Nifty50 index surpasses the 19,400 level on the upside, potentially driving it towards the 19,600 resistance. Conversely, a support area is anticipated in the range of 19,200 to 19,300 in the short term.

During this session, the BSE Sensex rose by 110 points to 64,997, while the Nifty50 gained 40 points to reach 19,306. The Nifty50's daily chart exhibited a Doji pattern, following a bearish candlestick formation in the previous session. This indicates the potential for range-bound trading in the upcoming days.

According to Ashwin Ramani, a derivatives and technical analyst at SAMCO Securities, the Nifty has found substantial support around the 19,260 mark in recent trading sessions, making it a strong support level. Additionally, the index managed to maintain its position above the 50-day exponential moving average (DEMA) of 19,286, recovering from a previous close below that level.

Ramani suggests that if the Nifty were to break below 19,260, it could trigger the initiation of fresh short positions, potentially leading the index down to 19,000. Conversely, for upward momentum to gather, the Nifty must surpass the 19,500 level, which coincides with the maximum Call open interest, indicating potential resistance.

While the benchmark indices demonstrated modest gains, the broader markets, as represented by the Nifty Midcap 100 and Smallcap 100 indices, outperformed the benchmarks with gains of 0.5% and 0.7%, respectively. However, this came alongside increased volatility, as seen in the India VIX fear index, which rose by 2.6% to 12.40 levels, marking a three-month high.

Key support and resistance levels for the Nifty were identified through pivot point calculations. The Nifty is expected to find support at 19,263, followed by 19,235 and 19,190. On the upside, potential resistance levels are at 19,352, 19,380, and 19,425.

The Nifty Bank played a supportive role on August 28, contributing to the market's positive performance. The Bank Nifty rallied by 263 points to nearly 44,500 levels, closely aligning with the 50-day exponential moving average (EMA). The daily charts depicted a bullish candlestick pattern accompanied by below-average trading volumes.

The Bank Nifty's future direction is anticipated to be influenced by option activity at the 44,500 strike, where both Call and Put writers are actively engaged. Ramani believes that if the Bank Nifty closes above the high of the previous trading session (44,610), it could signal a resurgence of bullish sentiment.

Key support and resistance levels for the Bank Nifty, as suggested by pivot point calculations, include 44,279, 44,183, and 44,026 for support, and 44,592, 44,688, and 44,844 for resistance.

Options data revealed significant open interest in various strikes. The highest monthly Call open interest was observed at the 19,500 strike, followed by the 19,400 and 19,600 strikes. Call writing was notable at the 19,600 strike. Conversely, the maximum Put open interest was recorded at the 19,300 strike, indicating potential support. Noteworthy Put writing occurred at the 19,300 strike as well.

Market participants exhibited varying strategies for different stocks. Some stocks saw long build-up, indicating increasing interest and potential for upward movement. These included Indiabulls Housing Finance, ONGC, Punjab National Bank, Piramal Enterprises, and PFC. On the contrary, some stocks underwent long unwinding, suggesting a reduction in bullish sentiment. This group included stocks like Coforge, Sun TV Network, GMR Airports Infrastructure, Escorts Kubota, and Wipro.

Additionally, certain stocks experienced short build-up, implying a potential for downward movement. These stocks included Mphasis, Delta Corp, Dr Lal PathLabs, Info Edge India, and Reliance Industries. Conversely, other stocks underwent short-covering, indicating a decrease in bearish sentiment. Stocks such as Metropolis Healthcare, Ramco Cements, Oracle Financial, Jubilant Foodworks, and Tata Chemicals exhibited this pattern.

Notable developments in specific companies included Tiger Global Management's divestment of shares in Zomato, ICICI Prudential Life and Fidelity acquiring a stake in Star Health, and various investor meetings scheduled for August 29. These meetings involved companies such as Somany Ceramics, Shoppers Stop, Can Fin Homes, Krsnaa Diagnostics, Dixon Technologies, and more.

Furthermore, there were updates about market trends and outlooks for particular sectors, such as Sun Pharmaceutical Industries projecting high-single-digit consolidated topline growth for FY24, and Indiabulls Real Estate appointing a new Chief Operating Officer.

Lastly, HFCL announced plans to raise funds through a qualified institutional placement (QIP) issue, with a specified floor price per share.

Disclaimer: Always consult financial professionals and perform thorough research before making any investment decisions.