Benchmark indices Nifty 50 and Sensex opened with mild losses on Thursday, May 15, as traders and investors hunt for direction amid a muted sentiment. Going ahead, experts believe the equity markets are likely to re-enter a phase of consolidation in the absence of fresh cues.

At 09:41 am, the Sensex was down 357.19 points or 0.44 percent at 80,973.37, and the Nifty was down 97.45 points or 0.40 percent at 24,569.45. About 1965 shares advanced, 932 shares declined, and 156 shares were unchanged.

However, despite the benchmarks seeing mild selling, the broader markets recorded gains, with the Nifty Smallcap 100 gaining 0.4 percent, while the midcap index reported a 20 basis points rise.

The sectoral indices opened mixed, with the auto, media, and metal stocks posting meagre gains. On the other hand, the FMCG, IT, and realty indices fell by up to 0.6 percent.

The volatility gauge India VIX ticked up 1.2 percent in early trade to the 17.43 level. A reading above the 15-mark implies that volatility remains high, and the markets can see sharp swings without much notice.

"The market appears to be heading for a near-term consolidation phase with the mid- and small-caps outperforming. The sustained robust FII buying, which lifted the largecaps, is likely to weaken in the new context of the trade deal emerging between the US and China," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said.

Global markets mixed

Overnight, Wall Street settled on a mixed note. The S&P 500 closed slightly higher after flitting between gains and losses during Wednesday's lackluster session as investors waited for the next batch of economic data after a robust start to the week spurred by soft inflation data and a US-China tariff truce.

The Dow Jones Industrial Average fell 0.21 percent, the S&P 500 gained 0.10 percent, while the tech-heavy Nasdaq Composite gained 0.75 percent in trade. S&P 500 is still about 4 percent below its February 19 record closing high, for its sixth straight day of gains.

Stocks in Asia fell on Thursday for the first time in five sessions as the rally on Wall Street sparked

by US-China trade talks showed signs of exhaustion.

FIIs, DIIs buy

Foreign institutional investors (FIIs) were net buyers to the tune of Rs 931 crore in Indian equities on May 14, while domestic institutional investors (DIIs) also added Rs 316 crore, provisional data from the NSE showed. The steady participation from both FIIs and DIIs provided continued liquidity support to the market.

Going ahead, Vijayakumar suggested that the possibility of a ‘Sell India; Buy China’ tactical FII trade cannot be ruled out. This will weigh on large caps and strengthen the case for a further rally in mid and smallcaps, despite the valuation concerns.

Technical Levels

"We are expecting the market to consolidate in the broad trading range of 24,400 and 25,000 for the next few days, and our strategy should be to buy on dips and sell on ups until the market closes above 25,000 or below 24,400," said Shrikant Chouhan, Head – Equity Research, Kotak Securities.

Options Outlook

The options data has tilted cautiously bearish. Call writers have become more active at higher strikes, triggering a wave of put unwinding, reflecting a retreat of bullish positions. Put writers are now relocating to lower strikes, a textbook sign of weakening bullish confidence, noted Dhupesh Dhameja, Derivatives Research analyst, SAMCO Securities.

He added that the 25,000 call strike has amassed significant open interest of over 1.30 crore contracts, making it a formidable resistance. Meanwhile, the 24,500 put strike has seen hefty writing with 60.52 lakh contracts, confirming it as a vital demand zone.

"With the Nifty failing to build upon previous gains and once again sinking into its former range, sentiment has turned visibly muted. A wave of unwinding has occurred, even as FPI flows turned decisively positive, keeping hope alive. But overall, the market seems to be entering a consolidation zone, with no clear directional bias," Dhameja added.

Strategy for investors

Traders should maintain a stock-specific approach and use this consolidation phase to accumulate fundamentally strong names. Alongside key sectors, themes such as defense, railways, and PSU banking are also offering trading opportunities. However, it's important to maintain a balanced view and avoid excessive exposure," said Ajit Mishra – SVP, Research, Religare Broking.

Hardik Matalia, Derivative Analyst at Choice Broking, shared that given the current environment of market uncertainty and heightened volatility, traders are advised to adopt a cautious 'wait and watch' approach, especially when dealing with high-leverage positions. He recommended to book partial profits on rallies and use tight trailing stop-losses to manage risk.