Nifty 50 Fights Off Front-Running Fears to Make Marginal Gains

Summary:
• The Indian markets regulator cracked down on Quant Mutual fund, sending panic in the equities market, but the Nifty 50 is resilient.

The Nifty 50 Index rose on Monday, gaining 0.16 percent to record 23,537 points. The Index recorded multiple all-time highs last week, as the post-election momentum on the Indian equities markets gathered pace. The minimal gains on Monday were underlined by the decline in the market bullishness after news that the market regulator, the Securities & Exchange Board of India (SEBI), was investigating front-running activities by a mutual fund.

SEBI is investigating Quant Mutual Fund over alleged front-running activities. SEBI conducted raids on the mutual fund’s offices and confiscated material and equipment such as computers and mobile phones, which will be subjected to analysis to determine who benefitted from the undertaking.

Front running is an illegal trading practice where a trader enters positions based on information on pending orders sourced from insiders such as market analysts or brokers. The Indian Mutual Funds market has been rising fast in recent years, growing to become a nearly 59 lakh crore as of end of May 2024. With more than Rs 93,000 crore AUM, Quant Mutual Fund is one of the forerunners in the industry.

Therefore, the impact of SEBI’s raid in the market could have far-reaching impact on investments beyond the mutual funds. The resulting market sentiment could be particularly concerning, especially if the regulator unearths the depth of the rot. This is not the first case of mutual funds being entangled in a front-running scandal in India. The most recent one took place in 2022, and saw punitive measures taken against Axis Mutual Funds.

However, the bullishness around the Indian economy will likely see many investors ignoring the troubles at Quant Mutual Fund. With the economy projected to grow by 7.2 percent  in 2024, and India’s inclusion in the JPMorgan’s largest emerging-market bond from June 28, the upbeat momentum will likely keep the Nifty 50 Index in the ascending trajectory in the near term.

Technical analysis

The Nifty 50 is on the upside momentum, and the motion will likely continue if action stays above the 23,537 pivot mark. That could see the next resistance established at 23,571, but a break above that mark will favour further gains to test 23,610. Conversely, a break below 23,537 will signal control by the sellers, and the resulting momentum could see the first support established at 23,475. Continued control by the sellers will breach the first support and likely invalidate the upside view. Also, it could strengthen the downside momentum to test 23,440.