D-street ended in green for third straight week amid concerns over slow monsoon; What lies ahead?

 

Indian equity benchmarks ended the week with marginal gains as selling on final day of the week ate most of the weekly gains after traders opted to book profit at record high levels amid slow progress of the monsoon. However, FII inflows and rally in banking stocks supported the market at highs.

The BSE Sensex surged 217 points, or 0.28 percent, to 77,210 during the week ended on June 21. The Nifty gained 36 points, or 0.15 percent, to 23,501. Sector-wise, the BSE Bankex index was top performer with a gain of 3.2 percent, followed by BSE Information Technology index (gain of 1.9 percent) and BSE Teck (increase of 1 percent). On the other hand, the BSE Auto index declined by 2.7 percent during the week.  

Only 14 stocks in the Nifty 50 index delivered positive returns for investors last week. With a weekly gain of 4.8 percent, Axis Bank emerged as the top gainer in the index. It was followed by ICICI Bank (up 4.7 percent), HDFC Bank (4.3 percent), Adani Ports (3.9 percent), and Kotak Mahindra Bank (3.3 percent). Infosys, Wipro, UPL and Tech Mahindra also advanced by over two percent. On the other hand, Hero MotoCorp, Ultratech Cement, and Maruti Suzuki India declined 6.2 percent, 5.1 percent and 5 percent, respectively.

FII and DII transactions during the week

Data available from ACE Equity showed that during the week that ended on June 21, Domestic Institutional Investors (DIIs) have bought equity worth Rs 9,575 crore. While Foreign Institutional Investors (FIIs) were also stood as net buyers in equity segment in the week with a net inflow of Rs 15,234.04 crore. FIIs also remained buyers in the debt segment with a net inflow of Rs 4,872 crore.  

Market Macros: According to Vinod Nair, Head of Research at Geojit Financial Services, The Indian market initially continued its upward trend as concerns over election outcomes eased and global sentiment improved. With a coalition government in place, there is optimism that the upcoming budget will strike a balance between growth initiatives and populist measures. Additionally, expectations are high for government actions aimed at stimulating consumption, a critical area to focus on.

He added, Strong institutional inflows, including renewed interest from FIIs post-government formation, have further bolstered market sentiment. However, profit booking emerged on concerns about the slow progress of the monsoon. Moreover, heatwaves in northern India remain a key concern. On the global front, the BoE opted to keep its interest rates unchanged despite UK inflation easing to 2%, leading to a degree of disappointment. However, there is now an increased probability of a rate cut by BoE in August.

In the US, there was a rise in jobless claims, and weak housing data has raised expectations of a 67% likelihood of a rate cut in September. “Looking ahead, the outcome of the GST meeting may trigger sector-specific developments next week, as rationalization of GST rates in some sectors, including textiles, fertilizers, and banking, is likely to be considered. Further, the discussion on the inclusion of petroleum products under the GST ambit is also a possibility", Nair said.

Nifty Outlook: Osho Krishan, Senior Analyst - Technical & Derivatives at Angel One, expects the consolidation to continue if Indian markets do not witness any aberrations from the global peers, “However the outperformance of the Banking space and a further move would certainly play in favor of the bulls, hence a close tab is required over sectoral performance in the upcoming week”, he said.

Krishan added, from a technical standpoint, the small-bodied candle formations suggest that the bulls may be reaching their limit and could be waiting for an external trigger to continue their momentum. As the Nifty index ventures into uncharted territory, it becomes challenging to identify the intermediate resistance.

“With the recent developments, 23650-23700 seem to pose a significant challenge, and a decisive closure could potentially trigger the next leg of the index's rally. On the lower end, strong support is observed around 23400, which has proven its reliability in the previous week, followed by the crucial support of 23200-23100 (20 DEMA)”, Krishan said.

Bank Nifty:

According to Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates, The Bank Nifty index opened with a gap-up note but was unable to sustain higher levels. As a result, Bank Nifty settled the day at on a negative note at 51,661.

Technically, on a daily scale, the Bank Nifty has formed bearish engulfing candlestick pattern. As per this pattern, 51,935 will act as resistance. However, index managed to sustain above the previous barrier of 51,134. “Now, 51,100–51,000 will act as immediate support for the index. Thus, we expect Bank Nifty to consolidate in the range of 51,000–52,000 in the short term," Yedve said.