The undercurrents stay strong, despite weak momentum overall
Nifty ended on Friday at 8672, down approximately 11 points from the previous week. The undercurrent of the market is still positive, despite weak momentum. Investors are entering into the markets at every dip. Nifty has immediate resistance at 8700 and 8728. If these two levels are taken off, we could see Nifty moving towards 8841. Strong support zones are at 8612 and 8538. On Friday, SBI came out with its numbers. It was better than street expectations. That positive sentiment reflected in its stock price on Friday. The stock gained nearly seven per cent. The earning season will come to an end this week. Earning upgrades are expected only from Q3 onwards.
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Union Finance Minister Arun Jaitley with UK’s Secretary of State for International Development, Priti Patel, before a meeting at South Block in New Delhi on Friday
On Friday, we saw retail inflation numbers coming out, which surged to 6.07 per cent in July, which is above the RBI’s comfort zone of 5 per cent. IIP numbers exceed market expectation, the IIP grew 2.1 per cent because moderate growth in mining and electricity sectors. Food inflation rose to 8.35 per cent in July, against 7.79 in June.
NSE PSU Banking Nifty has scope for further appreciation towards 3055.
Crude prices are in positive territory after Saudi’s Energy Minister hinted that Saudi will take necessary steps to open discussions next month, for stabilising crude oil price. The comment prompted the short sellers to cover their short positions. This lifted the crude price towards $45. As crude is recovering, profit booking is expected in OMC stocks, which had made a huge leap in its share prices. On the other hand, crude oil producers both in private and public sector stocks will move up from the current level, because these stocks are also ripe for an uptrend breakout. Metal stocks which corrected earlier, can witness minor recoveries this week.
Auto stocks are entered in the overbought zone, steep price corrections are not expected because this sector is the major beneficiary of GST.
On Friday, the US Bureau of the Census said that the retail sales were unchanged in July on a month-on-month basis. Weak retail sales data put pressure on the dollar, which can further can lift crude oil prices, and gold prices.
During the RBI policy meeting, the RBI kept interest rates unchanged, but confirmed that there will be enough liquidity in the system. RBI retained growth projection for 2016-17 at 7.6 per cent. On Friday, investors lighted up their positions ahead of long week end due to Independence Day. Some of the short positions were also closed out in the banking space.
On the final lap of the quarterly earnings, companies like Just dial, OCL, Power Grid, Philip Carbon, Radico, TCI, TVS Srichakra, Hind Copper, Gillette and India Cement will come out with numbers.
On the global macro front, US continuing jobless claims and US initial jobless claims are expected this week. From the Eurozone data like Inflation, Balance of Trade, unemployment rate and WPI Inflation, WPI Food Inflation and WPI Fuel Inflation are also due.
Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear market Strategies, Option Trading: Bull Market Strategies, Financial Services and System, Security Analysis and Portfolio Management published by Tata McGraw Hill. He is the founder of www.thedailybrunch.com.
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