D-Street rejoiced with expectation of a stable NDA government amid heavy FII selling. What lies ahead?

It turned out to be a jubilant week for Indian equity benchmarks with frontline indices settling all-time highs after all the members of the National Democratic Alliance (NDA) formally accepted and appointed Narendra Modi as the leader of the alliance and backed his candidature for the country's Prime Minister for a third term.

Vinod Nair, Head of Research at Geojit Financial Services, said the Indian market surpassed its previous record high set on exit-poll day and reached a fresh peak. Though the last mile towards the inflation target remains sticky, investors are expecting the MPC to be one step closer to the easing cycle.

“The anticipation of stability within the coalition government at the centre, coupled with the RBI's upward revision of its growth forecast for FY25 to 7.2%, fuelled a broad-based rally in the domestic market”, Nair said.

The BSE Sensex surged 2,732 points, or 3.69 percent, to 76,693 during the week ended on June 7. The Nifty gained 7.59 points, or 3.37 percent, to 23,290. Sector-wise, the BSE IT index was top performer with a gain of 8.2 percent, followed by BSE FMCG index (gain of 6.9 percent) and BSE Auto (increase of 6.8 percent). On the other hand, the BSE Capital Goods index declined by 1.7 percent during the week.  

In the Nifty 50 index, 41 stocks delivered positive returns for investors last week. With a weekly gain of 14 percent, Mahindra & Mahindra emerged as the top gainer. It was followed by Tech Mahindra (up 12.1 percent), Wipro (10.7 percent) and Hindustan Unilever (10.6 percent). Infosys, Hero MotoCorp, and HCL Technologies also advanced by over 8 percent.

On the other hand, Bharat Petroleum Corporation, Adani Ports, and Larsen & Toubro fell by 4.4 percent, 4.1 percent and 3.7 percent, respectively.  

FII, DII investments  

Data available from ACE Equity showed that in June first week domestic institutional investors (DIIs) bought equity worth Rs 5,579 crore as of June 7. On the other hand, foreign institutional investors (FIIs) sold Rs 14,794 crore of equities in this period.

Market Outlook

Nandish Shah, Deputy Vice President, Retail Research at HDFC Securities, sees short-term trend of the Nifty to remain strong. “Above 23,338, Nifty could extend the rise towards next resistance of 23,500 and 23,900. Support for the Nifty has shifted up to 23,000,” he said.

On market performance Shah said, Nifty has risen for the third consecutive session to close with the gains of 469 points to close at 23,290.15 as the NDA government’s formation gets closer. Nifty has gained 6.42 percent in last three session, which is highest three session rise since February 2021. For the week, Nifty gained 3.37 percent.

He added, during last three trading sessions, Nifty has recouped all the losses witnessed on June 4 and closed at an all-time high. Nifty Midcap 100 and Smallcap 100 Indices continued their upward journey for the third day in the row where they gained 1.41 percent and 2.31 percent, respectively. Nifty smallcap and Microcap 250 Index outperformed the Nifty and closed at all time high levels.

Speaking on the Reserve Bank of India's Monetary Policy he said the RBI MPC decided to keep the policy rates unchanged at 6.5 percent for the eighth consecutive time. The central bank also raised India's FY25 real GDP forecast to 7.2 percent from the earlier 7 percent, Shah said.

Bank Nifty

According to Rupak De, Senior Technical Analyst at LKP Securities, the Bank Nifty has shown a bullish momentum taking support near its 10-day moving average and forming a bullish engulfing candle on the daily chart. It closed near its resistance level, indicating strong buying interest.

“The key resistance level for Bank Nifty is 50,500, while 49,200 will act as crucial support. This setup suggests potential for further upward movement if the resistance is breached," De said.