Traders cautious amid Brent pullback; markets likely to stay volatile

Nifty gains 133 points as Brent crude eases towards $101-102 a barrel, while oversold conditions and softer US rate expectations support a relief rally

A pullback in Brent crude towards $101-102 a barrel has helped the Nifty 50 gain some points, giving relief to traders and investors alike. Cheaper crude oil and less-punitive dollar funding revived risk appetite after an eight-week losing streak driven by expensive oil and a global bond rout.

 

The Nifty 50 rose 133 points, or 0.60 per cent, to 22,555.75 on Monday, breaking a four-session slide. ITC led the gainers, with BSE, Shriram Finance, and NTPC also advancing. The bounce still sits well above the 22,000-22,200 support zone, though the India VIX rose 1.47 per cent (or 0.21 points) to end the session at 14.67, signalling caution.

 

 

Along with the Nifty 50, the Sensex gained 0.66 per cent to close at 72,382.47.

 

Analysts said the recovery was more of a pullback from the indices’ oversold zones, and markets are likely to remain volatile in the near term until global pressures ease.

 

Broader market indices Nifty Midcap 150 and Nifty Smallcap 250 also advanced 0.5 per cent and 0.4 per cent, respectively.

 

Tanvi Kanchan, associate director at Anand Rathi Share and Stock Brokers, said the relief rally followed key developments over the long weekend that eased some concerns.

 

“Brent crude has slipped to around $100-101 a barrel following the G7’s announcement to release 100 million barrels of oil. While this may not trigger a sustained decline, it could bring some near-term consolidation,” she said. “US jobs data was worse than anticipated, which has helped push back the anticipation of a Fed rate hike,” she added.

 

Brent crude oil futures were trading at $102.5 a barrel on Monday evening, while US 10-Year Treasury yields were at 5.27 per cent.

 

Other Asian markets such as Japan, Hong Kong, and Taiwan also rose between 0.3 per cent and 2.55 per cent on Monday, while Chinese and South Korean markets remained shut. 

 

Kanchan also said that domestically, banks have performed well on expectations of further rate hikes by the Reserve Bank of India, which could support lending rates and margins.

 

Bank and non-banking financial company (NBFC) stocks were among the top performers on Monday, along with FMCG, consumer durables and media stocks.

 

Hitesh Rathi, technical analyst at Angel One, said the confluence of multiple technical factors points towards the presence of demand at lower levels.

 

“A rising, upward-sloping trendline that has defended prices on three previous occasions is currently placed in the 22,000-22,200 zone. Although prices have closed below this rising trendline on Thursday, given the number of times demand has emerged in this zone in the past, a conclusive breakdown below this support band would be required to confirm further deterioration,” he said.

 

Rathi said that given the strong support in the 22,000-22,200 zone, and oversold readings across most technical and breadth indicators, he anticipates the possibility of a bounce in the coming sessions.