The main cause of worry right now is the cryptocurrency chaos. For the past few months, they have been plunging sharply alongside the global equity markets.
NIFTY 50 & BSE SENSEX made 52-week high
On November 11, 2022, the main Indian indices NIFTY and SENSEX reached new 52-week highs as a result of the worldwide rallies spearheaded by the American indices. Last Friday, the SENSEX reached 61840.97 and the NIFTY spot reached a high of 18362.3.
The surge in the leading large-cap stocks in the IT, financial, metal, and energy sectors was the cause of the rally. This rally needs widespread involvement from all sectors if it is to continue in November.
Although the two main indices of the Indian equity market, NIFTY, and BANKNIFTY, are quite strong technically.
Investors and traders are currently monitoring the stocks in their portfolios that have been held by sellers over the past few weeks. Street analysts now predict that either NIFTY or a robust rebound in those laggards will drive activity in those weak stocks.
NIFTY spot movement in October-November 2022
The NIFTY spot has experienced a lot of activity in the 16900–17350 zone during the last month. In the spot NIFTY, it frequently had strong selling pressure above and near 17400. Market participants had to deal with the volatility and premium erosion in that area for a number of days. Global volatility was also at its peak at the time due to the Fed rate hikes, the strong U.S. dollar index, and U.S. 10-year bond yields that were close to 4%.
As US 10-year Treasury bond yields traded above 4%, the US dollar index reached new highs above 114. The Dow Jones showed exceptionally high volatility in the month of October.
Despite intense selling pressure on the world markets, the Indian stock market continued to display its genuine power. Indian indices were awaiting the positive domestic and global queues to begin a new upward trajectory. The U.S. 10-year bond yield and the dollar index started to gradually fall.
Additionally, starting in the second week of October, frontline Indian IT stocks, led by TCS, reported Q2 results that were stronger than anticipated.
The performance of the frontline banking index, which can trigger a rise above 17500, was anxiously anticipated by Indian markets. Only Indian banking stocks, as you can see, outperformed other industries in 2022. Investors, therefore, had great hopes that the financials would drive the next stage of the boom.
Indian big banks began to report better-than-Q2 results in order to maintain the confidence of the buyers of Indian equities. As a result, NIFTY began to rise higher, breaking through the constrained consolidation range of 17150–17350.
Throughout the rally in spot NIFTY from 17400 to 18300, there were numerous gaps. But after the accelerated worldwide surge spearheaded by the Dow Jones, S&P 500, and Nasdaq, there is a good chance that the Indian equity market will reach a new record high in November.
Additionally, this week’s decline in the U.S. dollar index and 10-year bond yields has given bulls all over the world new-found optimism.
Now, the possibilities are endless if we closely examine the NIFTY charts on multiple time frames from daily to monthly. The sweet spot where the lagging and leading indicators can propel Indian benchmark indexes to a new all-time high.
Therefore, there is now a good likelihood that the NIFTY spot will attempt to reach and surpass the previous record high of 18604.40 in the upcoming week. There must be a rally in broader markets as well in order to reach that milestone.
Collapse of FTX
The main cause of worry right now is the cryptocurrency chaos. For the past few months, they have been plunging sharply alongside the global equity markets. However, based on the most recent sessions, the severity of the crypto market’s decline appears to be a very risky means for investors’ wealth to be severely destroyed.
The chaos in the crypto markets was worsened by the collapse of FTX, a cryptocurrency exchange last week.
Global cryptocurrency investors began to withdraw funds from the crypto markets after Binance and FTX’s acquisition agreement was canceled. Consequently, Bitcoin, the leading cryptocurrency, fell below 16000 for the first time in two years.
Investors in cryptocurrencies hurried to sell their coins, severely hurting their previous allure and domination. It has caused a dreadful catastrophe for the players who have joined FTX.
Although there is no direct connection between the equity markets and the cryptocurrency markets. But some large institutional investors are involved in some way, either directly or indirectly. Sentimentally, it might dampen everyone’s spirits, but eventually, the world’s equity markets will reclaim their majesty and allure.
There is also a strong possibility that cryptocurrency mishaps will continue in the upcoming days. Cryptocurrency enthusiasts will gradually lose faith in cryptocurrencies, and equities markets will attract more new traders and investors from around the world.
NIFTY forecast for the month of November 2022
For the spot NIFTY, the recent 17900–18000 range is developing into a solid base that won’t be easily breached on a closing basis. According to Nifty’s monthly open interest data, the upside spot NIFTY barrier was at 18300. But last week, NIFTY convincingly breached that level on the back of a strong global rally.
The spot nifty’s immediate next resistance level is merely 18500. The security with the biggest open interest for the month of November is the 19000 call option (CE), although it is a long way from the NIFTY spot’s current market price.
If we look at the NIFTY spot’s price history over the past year, we can see that it made three attempts to surpass the 18000 mark. NIFTY, however, was unable to rise over 18000 and remain there; instead, weekly attempts fizzled out around the area of 17800-17900. The NIFTY consolidation range covered more than 1000 points during the course of a year.
The latest breakout above 18000 in the spot has given the NIFTY a significant possibility of moving up by at least 1000 points above 18000. If that presumption is correct, the NIFTY will probably reach a new record high in November before falling below the range of 18000–17900.
The key rationale for the prediction of a new NIFTY record high
- Numbers for US inflation have decreased.
- Strong recoveries in the world’s financial markets, driven by American stock markets.
- The Indian major index BANKNIFTY has already reached a new record high.
- The sharp decline in the US dollar index against other currencies to below 110.
- Last week, the yield on US 10-year bonds plunged dramatically.
- The top five NIFTY 50 components are about to break out.
