March 5th 2024 Stock Market analysis

Stock Market's 4-Day Rally Halted in Volatile Trading; IT and FMCG Sectors Weigh Heavily

Indian indices halted their four-day winning streak on Tuesday amid weak global cues, witnessing significant losses in the IT and fast-moving consumer goods sectors. Both the BSE Sensex and Nifty faced downward pressure driven by subdued investor sentiment, attributed to China's lack of significant stimulus measures and the absence of early indications of rate cuts in the US. At close, the Sensex declined by 195.16 points or 0.3% to 73,677.13, while the Nifty dropped by 49.30 points or 0.2% to 22,356.30. Among the top laggards on Tuesday were Bajaj Finserv, which saw shares slide by 4%, followed by Bajaj Finance and Nestle India. Conversely, Tata Motors, Bharti Airtel, and Bajaj Auto emerged as the top gainers of the day.

‍Technical Outlook on 6th March

The Nifty has experienced mixed trading within the range of 22,600 to 22,050 in the near term, while Bank Nifty is anticipated to undergo high volatility, potentially accompanied by profit booking from elevated levels.

‍Derivative Outlook on 6th March

PCR Analysis: Nifty PCR-OI has decreased with nifty has negative close which shows CALL WRITING.

Open Interest Analysis: Nifty future March contract OI has decreased with negative close which shows Long Unwinding.

Cost of Carry Analysis: Nifty MARCH month contract has ended in low compare with Apr contract and low range compare with previous session which indicates a profit booking remains in higher levels.

India VIX Analysis: India VIX has closed at 14.38 vs 14.92 (DoD) basis which shows decrease in volatility.

Reality Check: Indian Chemical Industry Disappointed by China+1 Strategy

Initially perceived as a significant growth avenue for India, the China+1 strategy, aimed at diversifying supply chains away from China, failed to materialise as expected, particularly within the chemical sector. Indian chemical firms are grappling with a downturn in demand and the strain of ambitious capital expenditure plans, while their Chinese counterparts capitalize on market dominance by offering competitively priced products. Despite a notable shutdown of around 40 percent of China's chemical capacity in 2017, triggering the China+1 trend, China's global chemical sales share surged to 44 percent in CY22 from 40.7 percent in CY18. This growth, facilitated by state-backed expansions, contrasts with the repercussions of unregulated expansion, safety lapses, and environmental concerns, resulting in the closure of a significant portion of Chinese chemical capacity in 2017. Nevertheless, China swiftly rebounded, ramping up chemical output to address shortages caused by reduced production in countries like Japan, South Korea, and EU nations. Notably, Chinese output surged by 9.6 percent in CY23, contrasting with declines in South Korea (10.7 percent), EU27 (8 percent), Japan (6.4 percent), and minor declines in the US and India.