We feel that the rally still has more wind in its sails, and is likely to resume, and aim for a new record peak, as long as dips do not extend beyond 18000-17800 in Nifty,” says Anand James, Chief Market Strategist at Geojit Financial Services.
In an interview with ETMarkets, James said: “Bank Nifty appears exhausted, and would require ongoing dips to be held above 42400, so as not to lose the momentum to penetrate 42900 again and get back to the upside trajectory,” Edited excerpts:
Indian closed flat and in fact erased most of the gains of the week on Friday. What led to the price action?
We had started the last week with a base expectation of 18200-18300 and an optimistic expectation of 18600. But, with the achievement of the former, negative divergence in oscillators has become prominent, and we have entered a congestion region that had reigned in many advances in December 2022 and earlier.
This brings in genuine headwinds to a 1400-point rally. While this was refreshing, having come at the end of a three-month-long frustrating bear period, many of the driving forces, in terms of the lower base, FII index futures short covering, earnings positivity, etc. have mostly run its course.
While all this played out. The FOMC rate decision, on which traders had bet on, to change the ongoing momentum, came up with little surprise, as 25bps was hiked on anticipated lines.
But as against a consensus opinion of having arrived at the peak of a hiking cycle, FOMC adopting a data dependent stance leaves some more room for rate hikes.
And finally, the rising decibels on Karnataka elections may also have prompted traders to go easy into the weekend, with a preference to cash.
Which are important levels that one should watch out for in the coming week on Nifty50 and Nifty Bank?
VIX has been near a record low, silently boosting traders’ confidence, and has risen over 17% over the week, but it is not yet at a level that points to an outright collapse.
Towards this end, we feel that the rally still has more wind in its sails, and is likely to resume, and aim for a new record peak, as long as dips do not extend beyond 18000-17800 in Nifty.
Bank Nifty appears exhausted and would require ongoing dips to be held above 42400, so as not to lose the momentum to penetrate 42900 again and get back to the upside trajectory. Else, expect 41700.
In terms of sectors Consumer Durables rose in the week gone by while Commodities and banks fell. What led to the price action?
Consumer durables sector was driven by gains seen in Titan and Havells which together form around 61% of BSE Consumer durable index.
The gains could be related to better-than-expected results reported by Titan and Havells in Q4.
HDFC bank pulled down BankNifty towards the fag end of the week on expectation of foreign outflows post the listing of the merged entity on the MSCI India index.
In the case of Metal stocks, heavyweights like Tata Steel, Hindalco, and UPL contributed the most to the pullback.
ITC, ABB India, and KEI industries touched 10-year high or lifetime highs. What should investors do? Time to buy?
Stocks that broke above or make fresh all-time highs are considered positive. However, among these three, we expect ABB to continue its uptrend after the recent multi-month range breakout and could move towards 4170 levels before witnessing some pullback.
ITC and KEI Industries look exhausted with the momentum indicators in the monthly time frame showing exhaustion and warrant some correction/consolidation before it gears up for the next round of upmove.
The overall outlook of all three stocks looks positive but ITC and KEI look stretched while ABB could deliver more.
How are FIIs placed in May for the coming week?
Incidentally, the index future shorting that has been one of the main triggers for April, is no more potent, with FIIs holding as much 45% of its index futures as longs, a far cry from the 7.8% seen before April.
In equites, FIIs have been net buyers for the last seven consecutive days bringing in around Rs.11,700 Cr. Incidentally since the end of March FII inflows/outflows have been in a seven-day cycle.
The first seven-day phase brought in 4950 crore, followed by another seven days of selling taking out 5462 crores, followed by the recent seven-day spree of buying, which incidentally is the largest of the three phases.
Obviously, this suggests a potential slowing down by FIIs.
The big buying by FPIs was restricted to Financials, FMCG, Auto, and Metals while the rest of the sectors witnessed either selling or reduced buying. These four sectors could lead a recovery in markets.
First published in The Economic Times