Ahead of Market: 10 things that will decide D-Street action on Wednesday

Share markets notched up smart gains on Tuesday after a two-day losing run as investors accumulated IT, finance and energy stocks in the wake of encouraging retail inflation data. Retail inflation dipped below the RBI's upper tolerance level of 6% for the first time in 11 months in November as softening prices of food items brought relief, as per official data released post market hours on Monday. The 30-share BSE Sensex gained momentum as the session progressed to close 402.73 points or 0.65% higher at 62,533. Nifty settled above 18,600 points as investors’ sentiment got a boost.

Here's how analysts read the market pulse:

“After showing a sustainable upside recovery from the lows on Monday, Nifty continued its upside momentum amid a range movement on Tuesday and closed the day with decent gains of around 110 points. After opening with a positive note, the market continued with upside momentum in the early-mid part of the session,” Nagaraj Shetti, Technical Research Analyst, HDFC Securities, said.

“Nifty has reclaimed 18,500 after a brief slip below the crucial level. However, the overall sentiment remains subdued as the index needs to move above 18,700 for bulls to take control. Over the near term, the trend may remain sideways, with supports placed at 18,500. Resistances on the higher end can be seen at 18,630/18,700,” Rupak De, Senior Technical Analyst at LKP Securities, said.

That said, here’s a look at what some key indicators are suggesting for Wednesday's action:

US market
Wall Street stocks jumped, Treasury yields fell and the dollar weakened on Tuesday as new U.S. government data showed the smallest annual increase in inflation in nearly a year.

The consumer price index increased 0.1% last month after advancing 0.4% in October, the Labor Department said. Economists polled by Reuters had forecast the CPI gaining 0.3%.

The slowdown could give the Federal Reserve cover to start scaling back the size of its interest rate increases on Wednesday.

The yield on 10-year Treasury notes was down 16.4 basis points to 3.449%; 30-year yields fell 10.5 basis points to 3.471%, and two-year yields, which typically move in step with interest rate expectations, dropped 21.8 basis points to 4.183%.

European shares
European shares were subdued on Tuesday as investors refrained from making big bets ahead of consumer inflation data from the United States, a crucial report ahead of the Federal Reserve's interest rate decision on Wednesday. The region-wide STOXX 600 was down 0.04% at 0905 a.m. GMT, giving up early gains. On the pan-European STOXX 600, energy firms led gains, rising 1.2%, with the gains offset by weakness in the healthcare sector and consumer staples.

Tech View: Positive candle
A reasonable positive candle was formed on the daily chart on Tuesday, which is indicating a comeback of bulls after a small downward correction. After an attempt of downside breakout of the support at 18,550 levels on December 9, the market failed to show follow-through weakness in the next couple of sessions. This pattern indicates a false downside breakout of the support and such actions more often results in sharp upside movement.

Stocks showing bullish bias
Momentum indicator Moving Average Convergence Divergence (MACD) showed bullish trade setup on the counters of Union Bank of India, ONGC, BLS International, Anant Raj and Bharat Forge among others.

The MACD is known for signaling trend reversals in traded securities or indices. When the MACD crosses above the Signal Line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Stocks signaling weakness ahead
The MACD showed bearish signs on the counters of BHEL, Indiabulls Housing, Hindalco, Birlasoft and Dalmia Bharat, among others. Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms
Yes Bank (Rs 2,938 crore), HDFC Bank (Rs 1,406 crore), Kotak Bank (Rs 1,294 crore), RIL (Rs 1,008 crore) and RIL(Rs 971 crore) were among the most active stocks on the NSE in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Most active stocks in volume terms
Yes Bank (Shares traded: 128.8 crore), Central Bank (Shares traded: 21.58 crore), UCO Bank (Shares traded: 20.39 crore), IOB (Shares traded: 17.85 crore) and Bank of Maharashtra (Shares traded: 16.24 crore) were among the most traded stocks in the session on NSE.

Stocks showing buying interest
Shares of UCO Bank, Central Bank, IOB, Yes Bank and HUDCO witnessed strong buying interest from market participants as they scaled their fresh 52-week highs, signaling bullish sentiment.

Stocks seeing selling pressure
Shares of Laurus Labs and Polyplex Corporation hit their 52-week lows on Tuesday, which signals bearish sentiment on the counter.

Sentiment meter favours bulls
Overall, market breadth favoured bulls as 1,920 stocks ended in the green, while 1,605 names settled with cuts.

With inputs from PTI

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)