The Nifty 50 index continued its strong downward trend on Monday as investors braced for more volatility ahead of the upcoming US general election. The index, which tracks the biggest Indian companies, retreated to ₹24,000, its lowest level since August 6, and 8.50% from its highest level this year.
US election volatility
The Nifty 50 index has retreated in the past few days as investors assess its valuation, actions of the Reserve Bank of India (RBI), Federal Reserve, and the upcoming general election.
The biggest catalyst for the Nifty 50 index will be the US election, where Donald Trump and Kamala Harris will face each other.
A Kamala Harris victory will lead to more continuity, while a Trump success will likely lead to more volatility.
To some extent, India could benefit from a Trump victory for two main ways. First, Trump has focused his policies towards China by pledging a 60% increase in tariffs. Such a move will push more companies that sell products to the US to China, a country that has the available human resources and lower costs.
The Nifty 50 index has also pulled back because of the actions by the Reserve Bank of India (RBI), which has left interest rates at an elevated level this year.
In contrast, the Federal Reserve delivered a jumbo cut of 0.50% in the last meeting, and analysts believe that it will deliver another cut later this week. The Fed will cut rates by 0.25% and hint towards more cuts in the coming meetings.
A Fed rate cut will be a positive thing for global stocks, since it will be a sign that the global easing cycle is continuing.
A key concern for the Nifty 50 and BSE Sensex indices is that they have become highly overvalued this year. Data by TrendLyne shows that the Nifty 50 index has a price-to-earnings ratio of 23.2, lower than the year-to-date high of 24.5.
The PE multiple is higher than the S&P 500 index average of 21. It is also much higher than the pandemic low of 17.15, meaning that the index has become highly overvalued.
Top Nifty 50 earnings ahead
The biggest catalysts for the Nifty 50 index this week will be the Federal Reserve decision and the US election.
The index will also react to earnings from some of the biggest constituent companies in the country.
Vedanta, a large mining company, will be the first Indian giant to publish its results on Monday. It will be followed by ABB India, Hero MotoCorp, Fsn E-Commerce, and Linde India.
The other companies to watch this week will be Titan Companies, Dr. Reddy’s Laboratories, Mazagon Dock, Power Grid, Tata Steel, Apollo Hospitals, Mahindra & Mahindra, Tata Motors, SBI, Eicher Motors, and Ashok Leyland.
These are some of the top companies in India and the Nifty 50 index, meaning that their results will have an impact.
Most notably, companies within the Tata Group of companies will be in the spotlight as most of them publish their results.
The other key catalyst for the Nifty 50 index is the performance of the Indian rupee, which has remained in a tight range. The USD/INR pair has moved to 84, and is a few points below the key resistance point at 84.14.
Read more: Ratan Tata: the rare businessman who everyone loved
Nifty 50 index analysis
Nifty chart by TradingView
The daily chart shows that the Nifty 50 index peaked at ₹26,266 in October, and has also pulled back in the past few days.
It has now crashed below the 50-day Exponential Moving Average (EMA), meaning that bears are in control for now/
The MACD and the Relative Strength Index (RSI) have all moved downwards. Therefore, the index will likely continue falling as sellers target the next key support at ₹23,000.
However, the index will likely remain being volatile in the coming days as focus shifts to the US election.
The post Nifty 50 index analysis ahead of Titan, Vedanta, Tata earnings appeared first on Invezz
