“For the first time in 15 months, the Indian equity market fell for the fourth week in a row. Sensex, Nifty, and Nifty Bank fell nearly 1% each with 31 Nifty stocks recording losses. This can be attributed to profit booking in the Nifty metal sector and selling activity by foreign institutional investors (FIIs). An intriguing aspect is that, despite this downturn, the midcap and smallcap markets have maintained a bullish sentiment throughout this period,” Pravesh Gour, Senior Technical Analyst, Swastika Investmart said.
Macroeconomic indicators, trends in global stock markets, and Foreign Institutional Investors’ (FIIs) activities will be pivotal in shaping market trends in the coming days, Gour said, while highlighting the movement of rupee against the dollar along with the listing of Jio Financial Services on Monday, August 21.
Factors that are likely to impact movement when markets reopen this week:
US Markets
Benchmark indices on Wall Street ended lackluster on Friday as inflationary concerns and length of high interest rate regime weighed on investor sentiment. Dow 30 ended at 34,500.70, up by 25.83 points 0.07% while S&P 500 closed at 4,369.71, lower by 0.65 points or 0.01%, Nasdaq Composite shut at 13,290.80, witnessing a 26.16 points 0.20% decline.
When Indian markets reopen on Monday, they will take cues from the Friday closing of the US markets. They will also track movement in Dow Futures and GIFT Nifty futures on Monday. The latter is an early indicator of movement in the Nifty50 and on Monday.
Global Macros
US will announce its S&P Global Services and manufacturing data along with composite PMIs and initial jobless claims. UK S&P Global and CIPS data will be declared along with UK PMI Manufacturing data. Eurozone S&P Global Services and Manufacturing PMI and consumer confidence data will be declared during the week. China will declare 1-year, 5-year loan prime rates.The Street will also be looking at Federal Reserve Chair Jerome Powell’s speech on Friday, August 25 at Jackson Hole Economic Policy Symposium.
Rupee Vs Dollar
The Indian rupee ended stronger on Friday, aided by the softness in US treasury yields and some easing in the dollar after concerns of US interest rates staying higher for longer pushed the local unit to a record low earlier in the week. The rupee closed at 83.1025 against the U.S. dollar, up 0.05% on the day. On the week, however, the currency declined 0.31%, Reuters reported.
Rupee is expected to remain in the range of 82.90 to 83.50 with broadly moving towards weakness depending upon how the Reserve Bank of India (RBI) intervenes, Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors said.
Corporate Action
Listing of Jio Financial Services stock on Monday; GI Engineering to augment long-term financial resources by fund raise; Shoppers Stop investor Day; IndoStar Capital to consider issuance of NCDs up to 7,500 crore SEPC; August 21 last day to buy to be eligible for dividend: Dreamfolks, KPI Green, Karnataka Bank, Natco Pharma, NHPC, Sun TV Network; August 24 is last day to buy stocks to be eligible for dividend: ABB India, Engineers India, GIC Housing, Gulf Oil, KRBL, NCC, Seamec, Surya Roshni; Last day to buy to be eligible for buyback: FDC, Indiamart, KRBL, Piramal Enterprises.
AGMs
Kotak Mahindra Bank, Kolte Patil Developers, Motherson Sumi Wiring, GAIL India, Eicher Motors, Jammu & kashmir Bank, Bharti Airtel, Hindustan Zinc, Vedanta Fashion, Aurobindo Pharma, Info Edge and others.
Technical Factors
Gour of Swastika Investmart sees Nifty index exhibiting signs of weakness, characterised by a lower top formation. The put-call ratio currently rests at 0.98, approaching levels that indicate potentially oversold conditions.
“It is respecting its 50-day moving average (50-DMA), positioned around the 19,270 mark. On the downside, immediate support rests at 19250. A breach below this level could expose Nifty to further declines, possibly targeting the 19,191 and 18,888 levels,” the analyst said. “Above 19,460, we can expect some short covering towards the 19600 level. The re-establishment of bullish momentum hinges on a rebound above the 20-DMA, which lies at 19,650,” he added.
As for Bank Nifty Conversely, a breakdown of a head and shoulder formation has been witnessed below the crucial support level of 44,444 though it is respecting its 100-DMA of 43,600. “Below this, 43300 is an immediate support level, while the 200-DMA around 42800 is a key support level. 44200 and 44500 are key hurdles on the upside,” Gour said.
FII / DII Action
FIIs and DIIs will be crucial on how markets perform on Monday. On Friday, foreign institutional investors were net sellers and sold Indian equities worth Rs 266.98 crore. Meanwhile, domestic institutional investors (DIIs) were net buyers at Rs 339.18 crore.
After three months of sustained buying with cumulative investment of Rs 137,603 crores, FPIs turned sellers in August, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services informed. Of late, FIIs have started selling in financials though it is countered by DII buying, but this is turning out to be inadequate to arrest the decline in the market, he said.
Gold
Gold is expected to remain under pressure in the international markets amid a stronger dollar index (DXY) and higher US bond yields, with a rub-off impact on the local prices, as well, when trading resumes next week. The movement will likely remain sideways with limited upside, experts tell ETMarkets.
Gold has been losing its appeal as a safe haven on inflationary fears and continuance of a higher interest rate regime in the US for much longer than anticipated, commodity and currency expert Anuj Gutpa said. This is strengthening the dollar index while raising bond yields, he said, expecting gold and silver to trade sideways next week amid strong resistance at higher levels. Gupta is Head Commodity & Currency at HDFC Securities.
In the absence of a news-based stimulus, it is unlikely that a spurt of buying would happen that could take gold prices higher, Praveen Singh, Vice President, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas said.
Gupta’s advice to traders is to buy gold around Rs 58,000 levels with the stop loss of 57,500 levels and target of Rs 58,700 and then Rs 59,000. On Friday, October Gold futures ended at Rs 58,378, up by Rs 88 or 0.15% over the Thursday closing price.
Crude Oil
Benchmark US crude oil for September delivery rose 86 cents to $81.25 a barrel Friday. Brent crude for October delivery rose 68 cents to $84.80 a barrel, AP reported. Wholesale gasoline for September delivery was unchanged at $2.82 a gallon. September heating oil rose 7 cents to $3.16 a gallon. September natural gas fell 7 cents to $2.55 per 1,000 cubic feet.
On MCX, September crude oil futures ended at Rs 6,781, up by Rs 96 or 1.44%.
On next week’s trading strategy, Gupta of HDFC Securities said that the technical trends point to positivity in crude oil and traders can look to buy on dips around Rs 6,500. A strong support is seen at Rs 6,500 and then at Rs 6,300 while resistance at Rs 6,900 – Rs 7,100 levels.
Bond Yields
Indian government bond yields rose for a fourth consecutive week as elevated US yields, as well as a jump in local inflation added to worries of interest rates remaining higher for longer in India as well as in the United States, Reuters reported. Bond yields, however, ended the day lower, after better-than-expected demand at debt sale and as the benchmark yield was unable to breach key levels on the upside.
The benchmark 7.26% 2033 bond yield ended at 7.2172% after ending the previous session at 7.2487%. The yield rose two basis points this week after rising 12 bps in the last three weeks. Sentiment also weakened as India’s July retail inflation spiked to a 15-month high of 7.44% from 4.87% in the previous month.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)