Dalal Street Week Ahead: Nifty Analysis for June Third Week

LAST WEEK

NIFTY opened with a small gap-down on Monday as the global markets had a bearish close on Friday. The index could close flat but there was a huge gap-down the following day as the Asian markets were negative and the crucial level of 16,450 was broken. The global sentiments were rather positive on Wednesday but the fear of an RBI repo rate hike led to a quick fall. 16,500 proved to be a hard resistance. The market closed lower and there was a gap-down opening the next day. The index rallied with the help of Reliance and short covering. However, the fear of US inflation data led to negativity in the global markets and NIFTY fell heavily to close the week at 16,202, down by 383 points or 2.3%.

BANK NIFTY opened flat at 35,180 and moved up on Monday. 35,400 acted as a resistance and BNF opened lower on Tuesday. Wednesday was very volatile as it was an event day. Though the index managed to give a close above 35,000 on Thursday, the whole gains were lost due to the fall on Friday. BNF ended the week at 34,484, down by 791points or 2.2 %.

IT moved down by 2.6%.

Foreign Institutional Investors net sold shares worth Rs 12,700 crores last week.

Domestic Institutional Investors net bought shares worth Rs 9,600.

The European and the US markets were very bearish last week plunging by nearly 5%. The US CPI inflation came out at 8.6%, a 40-year high and this was unexpected. The core CPI also was much higher. We can expect aggressive tightening by the Fed.

However, the Asian markets moved higher. Though China had called off lock-down recently, Shanghai has again moved to lockdown as the cases are rising. Let us see how the Asian markets react to the inflation data on Monday.

RBI hiked the interest rate by 50 basis points as expected. They have also withdrawn the accommodative stance. But the Governor said that the liquidity is higher than the pre-pandemic levels now, which means there is an accommodative aspect to the stance.

The only positive element we can see now is that the IIP data came out at 7.1%, an 8-month high.

Other major events of the week were:

Fereidun Fesharaki, a gas market analyst (Chairman of FGE, a leading energy consultant group) said that China will drive the demand for oil without an increase in supply as we do not have Russian exports and this will only lead to increasing oil prices which should have been below $90 otherwise.

Domestic steel makers are set to decrease the prices in the coming days, by Rs 5000 a ton. The cost of raw materials has come down and the govt will rein the prices to control inflation. 

JP Morgan said that there could be even more fall in IT.

Nirmala Sitharaman at the MCA event said that retailers are becoming stronger in our market.

Japan’s GDP shrank 0.5% against an expected 1%. 

The Reserve Bank of Australia hiked the interest rate to 0.8% on Tuesday and this is more than the expected 0.6%. But the markets did not react negatively.

 The ECB will hike the rate for the first time,  by 25 basis points in July. 

Amazon has pulled out of bidding for cricket rights in India. 

Russia has cut the interest rate from 11% to 9.5% as their inflation data suggested that inflation might have peaked. This is the pre-war interest rate level. They had increased it to 20% on 28th February. 

SGX NIFTY is at 16,050.

INDIA VIX is at 19.6.

WEEK AHEAD

NIFTY has supports at 16,170, 16,080 and 16,000. We can expect resistances at 16,240, 16,310 and 16,360.

BANK NIFTY has supports at 34,400, 34,250 and 34,000. Resistances are at 34,500, 34,650 and 34,800.

NIFTY has the highest call OI build-up at 17,000 followed by 16,500. The highest put OI build-up is at 15,400 followed by 16,000.

BANK NIFTY has the highest call OI build-up at 35,000 and the largest put OI build-up is at 34,500.

Let us see how the markets react to the US CPI data. The Fed interest rate decision will be out on Wednesday and we can expect a rate hike as inflation has again touched the high. The Fed has already hiked the rate by 25 bps and 50 bps in March and May taking the discount rate to 1%. 

Though the India IIP data came out at an 8-month high, the market would give weightage to the negative sentiments set by inflation. Moreover, we have India CPI data to be out on Monday and WPI will be out on Tuesday. Altogether, the week will be event-driven.

A close below 16,000 will again lead to sharp negativity. Let us watch 15,700 if the market falls further. Remember that the mid-term trend is still bearish and what we saw recently was just a short-term advance. I will be watching 16,500 on the upside.

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