Trade setup for Nov 4: What to expect from Nifty50 on Diwali? Key market cues before Muhurat trading session

Indian equity benchmarks ended a choppy session lower on the eve of Diwali 2021, as gains in infrastructure, metal and select IT shares were outweighed by losses in financial and oil & gas securities. The market will now open for a special, one-hour-long 'Muhurat' trading session on the day of Diwali, Thursday, November 4.

The Nifty50 index has formed a small negative candle on the daily chart on the Diwali eve, signalling rangebound movement ahead with a weak bias, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

As long as the 50-strong gauge remains rangebound below crucial overhead resistance at 17,950-18,000 levels, there is a higher possibility of an upside breakout in the near term, he said.

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The index has been consistently trading below its 20-day simple moving average, and made a lower top formation near 18,000 on the intraday chart, which is broadly negative for the market, said Shrikant Chouhan, Head-Equity Research (Retail) at Kotak Securities. However, as long as it remains above 17,750, the uptrend texture appears to be intact, he said.

Nifty futures on Singapore Exchange -- an early indicator of the Nifty50 index in India -- rose 40.5 points or 0.2 percent to 17,923.5 on Thursday, suggesting a positive start ahead on Dalal Street.

European stocks rose on Thursday as global markets reacted to the Federal Reserve’s announcement that it will start to taper its bond-buying program. The pan-European Stoxx 600 was up 0.4 percent at the last count, with oil and gas leading gains as most sectors and major bourses held in positive territory.

Overnight on Wall Street, the three main indices rose 0.3-1 percent.

The US central bank said that it would start to curb the pace of its monthly, pandemic-era bond buys later this month. It would slow buying by $15 billion per month, which means the quantitative easing should end by the middle of 2022. However, the Fe reiterated flexibility, saying the amount could change if warranted.

A sustainable move above 18,050 is expected to open fresh buying enthusiasm in the market, according to HDFC Securities' Shetti. Any weakness below 17,750 could result in the index revisiting important support at the 20-week exponential moving average around 17,600, he said.

Rahul Sharma, Co-Founder of Equity99, does not expect much volatility in the Muhurat trading session, with the broader seen making an upmove. He expects banking financial, realty and metal shares to be in focus on the Diwali session.

Foreign institutional investors (FIIs) net offloaded Indian equities worth Rs 401.5 crore on Wednesday. However, domestic institutional investors (DIIs) were net buyers of shares worth Rs 195.6 crore, exchange data showed.

The maximum open interest remains at the strike price of 18,000, and there is a high degree of open interest at 17,900 and 18,500. The maximum put open interest is placed at the strike price of 17,800, and the next highest at 17,500, NSE data shows. This suggests immediate resistance can be expected at 17,900, followed by a major hurdle at 18,000, and support comes in at 17,800, followed by 17,500.

Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:

As many as 34 stocks in the BSE 500 index -- the broadest gauge on the bourse -- hit 52-week highs, including SBI, Canara Bank, TVS Motor, Brigade Enterprises, Oberoi Realty, Aditya Birla Fashion, Raymond, Shriram Transport, VRL Logistics, Minda Corp, Lemontree and Relaxo.

Three stocks in the index hit 52-week lows: Aarti Drugs, Bayer Cropscience and Hathway Cable.

NSE's India VIX index — which gauges the expectation of volatility in the near term — eased 5.5 percent to end at 16.1 on the Diwali eve, having plunged as much as eight percent during the session.