“Global markets saw a sharp correction in the last two sessions after a decline was triggered by Fitch’s recent downgrade of the US credit rating. The Indian markets followed suit and fell for the second week in a row, with the Sensex, Nifty, and Nifty Bank losing 1% each. IT and pharma stocks gained the most while realty and PSU banks were the top losers. This was primarily a normal profit-taking activity, as there were no significant cues to disrupt the market sentiment. Midcaps relatively outperformed, with the Midcap Index posting a 1% gain for the week,” Pravesh Gour, Senior Technical Analyst, Swastika Investmart said.
Factors that are likely to impact movement when markets reopen this week:
US Markets
Benchmark indices on Wall Street ended lower on Friday continuing their fall spree post the Fitch credit rating downgrade. Dow 30 ended at 35,065.60, down by 150.27 points 0.43% while S&P 500 closed at 4,478.03, lower by 23.86 points or 0.53%, Nasdaq Composite shut at 13,909.20, witnessing a 50.48 points 0.36% decline.
On Monday, Indian Markets are likely to 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.
2) Global Macros
Plenty of data to be announced by the US this week including those on trade balance, CPI, initial jobless claims, wholesale inventories and consumer sentiments. The UK will declare industrial production, manufacturing production and GDP data. China will announce its FDI, CPI, producer price index (PPI) and trade balance data. India will announce its industrial production data.
3) RBI MPC
The Monetary Policy Committee (MPC) which will meet on August 8, will announce its policy decisions on Thursday, August 10. Radhika Rao of DBS Group Research expects hawkish rhetoric from the RBI policy committee while Sujan Hajra, Chief Economist at Anand Rathi Shares and Stock Brokers does not see further rate hikes in India with current inflation 50 basis points lower than the long-term average and the country’s existing policy rate.
While not ruling out another 25 basis point rate hike in India, Sujan Hajra believes that the MPC will conduct at least another review to evaluate whether the inflationary risk is much higher than previously expected.
There has been a status quo on repo rate at 6.5% since February.
4) Corporate Action
Top companies including Tata Motors, Larsen & Toubro, Hero MotoCorp, Tata Steel HDFC Bank MTAR Technologies, UltraTech and Biocon among others will hold their annual general meeting (AGM) this week.
Reliance Power, Reliance Infra to consider issuance of equity shares/equity-linked securities/warrants convertible into equity shares, by way of a preferential issue. Ease My Trip to consider issuance of equity shares; GIC Housing Finance to consider fundraising proposal; Maruti Suzuki to consider mode of acquisition of 100% stake in Suzuki Motor Gujarat Private Limited; GMR Power, Uno Minda to consider a proposal for raising funds while FDC will consider share buyback in the upcoming week.
5) Q1FY24 Earnings
A slew of June quarter earnings will be announced during the week including those from Adani Ports and Special Economic Zone, Coal India, Hindalco Industries, Grasim Industries, Hero MotoCorp, Apollo Hospitals, ONGC and LIC.
The Street will also react to Q1 earnings announced post market hours on Friday and during the weekends including those of Bank of Baroda and Mrs. Bectors Food Specialities.
Earnings of top global companies will also be declared this week including those of Bayer, Softbank, Foxconn, Sony, Disney and Siemens.
6) Technical Factors
While Friday’s positive closing reduced weekly losses for the Nifty, markets are still not completely out of the woods yet, Sameet Chavan, Head Research, Technical and Derivatives, Angel One said. The Nifty has slipped and closed below the 20-day EMA for the first time since March 31, 2023 and till Nifty does not surpass 19,550 – 19,600 on a closing basis, one should avoid aggressive trades, Chavan advised.
Nifty could go back to challenge 19,400 – 19,300 levels if there is any further global aberration and a move below this would reinforce the selling pressure to slide towards the next important cluster of 19,000 – 18,800, this analyst said. On the other hand, a move beyond 19,600 is crucial with global things needing to subside completely.
Bank Nifty on the other hand has shown some strength by regaining its 50-DMA but there is another critical resistance at the 20-DMA, approximately at 45, Pravesh Gour, Senior Technical Analyst, Swastika Investmart pointed out. “If Banknifty manages to break above this level, it could trigger short-covering and potentially lead to further gains. However, if it fails to break the 20-DMA, there’s a possibility of the index falling towards the 43,300 level,” he warned.
7. 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 556.32 crore. Meanwhile, domestic institutional investors (DIIs) were net buyers at Rs 366.61 crore.
8. Rupee Vs Dollar
The Indian rupee weakened to a fresh two-and-half-month low on Friday, which led to its biggest weekly drop in a month, due to the selloff in Asian currencies after Fitch downgraded the US sovereign rating. The rupee ended 0.14% lower at 82.84 per dollar, taking its loss for the week to 0.7%, which is its worst weekly drop since the week ending July 7. The rupee’s losses would probably have been larger if there was no dollar-selling intervention by the Reserve Bank of India, PTI reported quoting traders.
“I would not give any particular emphasis to the rupee showing any directional trade. Whether it is at 81.70 or 82.80, the RBI is present on both sides. Basically, there is no other factor keeping the rupee in these ranges,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
The rupee is expected to remain in the range of 82.60 to 82.95 in the coming week as $ bullish sentiments continue, while we expect RBI to protect the upside of USD/INR not going beyond 82.95, he added.
9. Gold
Safe haven demand in gold has gone up due to Fitch’s downgrade to the US credit rating but a downgrade to China by Morgan Stanley has put pressure back on the metals, Anuj Gupta, Head – Commodity & Currency at HDFC Securities said. Gold futures increased by 0.17% and closed at 59,527 levels while Silver futures’ price corrected by 2.13% and closed at 72,478 levels, he said
Traders can buy October gold futures around Rs 59,000 levels with a stop loss of Rs 58,500 levels for the target of Rs 59,800 and then to the next target of Rs 60,000, he recommended. As for September Silver futures, support is seen at Rs 71,000 and then at Rs 68,000 while resistance at Rs 74,000 and then at Rs 76,000 levels. He expects Silver price to recover and may test Rs 74,000, very soon.
10. Crude Oil
Prices of crude oil increased after top producers Saudi Arabia and Russia extended supply cuts through September, adding to the existing undersupply concerns. Crude oil prices are expected to rise further due to supply crunch and may test $88 to $90/ BBl, Gupta opined.
The August crude oil futures ended Friday at Rs 6,858 per BBl, up by Rs 97 or 1.43%.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
