Dalal Street Week Ahead: Nifty Analysis For August Final Week

LAST WEEK

NIFTY opened the week with a gap-up at 17,800 and closed higher on Tuesday. There was buying on Wednesday also. However, Thursday was volatile with selling in the first half and fierce buying in the noon to have another green close for the index. Profit booking kicked in on Friday and the global cues were negative. There was heavy selling and NIFTY has formed a huge bearish engulfing candle in the day chart. The index ended the week at 17,758, up by 60 points or 0.34%. 

BANK NIFTY opened with a gap-up at 39,286 and moved lower. Taking support at 39,100, the index started moving up slowly. Thursday was volatile but BNF managed to close above 39,500. The heavy selling on Friday took the index below 39,000! BNF closed almost flat at 38,985, down by 56 points or 0.14%.

IT moved up by 0.5%.

Foreign Institutional Investors net bought shares worth Rs 3,200 crores last week.

Domestic Institutional Investors net sold shares worth Rs 1,800 crores.

NIFTY had crossed the upper trendline that was supposed to be a strong resistance to this relentless rally. However, there was huge selling pressure on Friday and as a result, the weekly candle is a weak red candle, that is almost a shooting star. 

The US markets closed in the red weighed down by IT stocks. The blue chip companies in the other sectors performed well last week. FTSE advanced the previous week but DAX dropped by 1.8%. The German market lacked strength throughout the week and we have reasons for the same. The Asian markets moved down except for NIKKEI.

Looking at the overall picture, August month has been excellent for the global markets except for Chinese markets but they are facing selling pressure now. The cues from Germany are gloomy. Germany's Producer Price Index rose 37.2% YoY. The estimate was 32% and the previous data was 32.7%. Energy shortage is the major reason. Looking at MoM data, the expected was 0.6%. And the figure came out at 5.3%! This is the highest since 1949! 

Apart from this, the Eurozone GDP data came out at 3.9% and Britain’s CPI came out at a two-digit figure for the first time in 40 years. CPI is 10.1%. The estimate was 9.8% whereas the previous figure was 9.4%. You might be aware that the Bank of England thinks the UK will be in recession soon, till the end of 2023.

The US Dollar index saw a breakout above $107 and this added fuel to the fire. 

Looking at local cues, WPI has eased to 13.9%, against an expected 14.2%. But the markets had already reacted to CPI on opening. 

Fed minutes of the July 26-27 meeting emphasised that there is little evidence of decreasing inflationary pressures. They will have to go for hikes but slowly reduce the pace to half and quarter basis points. However, we can expect a 75 basis point hike in September.

SGX NIFTY is at 17,658.

INDIA VIX is at 18.3.

WEEK AHEAD

NIFTY has supports at 17,600, 17,640, 17,500 and 17,340. We can expect resistances at 17,820, 17,900, 17,960, 18,000 and 18,055.

BANK NIFTY has supports at 38,760, 38,500, 38,350 and 38,000. Resistances are at 39,000, 39,200, 39,670 and 40,000.

NIFTY has the highest call OI build-up at 18,000. The highest put OI build-up is at 17,000 followed by 17,500.

BANK NIFTY has the highest call OI build-up at 39,500 and the largest put OI build-up also is at 38,000.

Though you can see a lot of negative global cues hanging around, the rally has been fantastic and you can see these pauses as just pull-backs for the time being unless a major swing point is taken. The US markets had a very good breakout and the same is the case for NIFTY. Let us see how the month ends. 

It is monthly expiry this time and it can be quite volatile especially when we had opposing moves in the Indian market and the local market last week. It looked to me that the fall we had on Friday should have come on Thursday itself looking at the structure and the weak opening of the European markets. However, the magnitude of the fall was quite unexpected!

Though there has been heavy buying by FIIs in recent days, they turned out to be net sellers on Thursday. But there was Blackstone selling shares of Sona BLW worth Rs 4,000 cr and this distorted the FII figure. Let us see if FIIs can continue to pour in liquidity taking our market to an all-time high.

We can be bullish as long as 17,300 is protected. We do not have major local cues this week. But we have Jackson Hole Symposium this week, from 25th to 27th of August. Jerome Powell will have to answer the questions regarding rising inflation and the interest rate hike strategy here. The most influential people would join the event that takes place annually in Wyoming.

The US and Germany will announce their Manufacturing and Services PMI data on Tuesday. Germany will also release their GDP data on Wednesday. We can expect the figure at around 1.5%.

I will be watching 17,330 on the downside and 18,000 on the upside in the long term. The immediate levels I watch are 17,600 and 17,820.

Let us know your expectations for the week in the comments section!