Markets this week: Markets settled on a flat note last week, followed by sell-offs in banking, consumer discretionary, metals, IT and auto stocks. Markets ended higher for the third straight week, led largely by positive global signals in the latest session. On the domestic front, favorable updates on monsoon progress further boosted sentiment. After a strong start to the week, the benchmark remained in range until the end, but remained positive, thanks to healthy buying from select major indices across all sectors. As a result, the Nifty index ended up 1.4 percent, closing at the level of 16,584. Broader indices also witnessed some decent traction, as both mid-caps and small-caps finished higher at 1.3 percent and 4.4 percent, respectively.
Ajit Mishra, VP – Research, Religare Broking Ltd, said: “With the earnings season behind us, the focus is on the upcoming MPC’s monetary policy review meeting, scheduled for June 6-8. Markets have already priced in another hike, citing sticky inflation, but the focus would be on commentary amid the updates of a favorable monsoon. In addition, the performance of global markets and the movement in crude oil will also be central. On a macroeconomic front, participants will be watching IIP data on June 10.”
The Monetary Policy Committee of the Reserve Bank of India is set to meet next week and the outcome is expected on June 8. Markets are once again gearing up for another volatile week, with RBI’s policy in the spotlight given the deteriorating inflation state. Experts predict a 25 basis point to 50 basis point rate hike by RBI, following the trend of the US Fed. Also, banks’ reactions to their loans and deposits amid the change in RBI’s repo rate will be closely watched.
In addition to the Reserve Bank of India, the European Central Bank will also meet next week and the outcome is expected on June 9. The ECB recently suggested it should move quickly to rate hikes after eurozone inflation reached multi-year highs and crossed the line. eight percent in May.
Crude Oil Prices
Next week, the price of black gold will take center stage, as a recent rise in the price of the commodity has made investors concerned about the inflation trajectory. Global Brent futures hit a high of $123 a barrel last week amid new sanctions imposed on Russia by the European Union. Towards the end of the week, prices cooled as the Organization of the Petroleum Exporting Countries (OPEC) decided to increase oil production to ease supply pressures.
Macro Economic data
Several key economic data points will also be on investors’ radar next week. The Street will look to China’s inflation data for May for signs of economic recovery as lockdowns ease in cities like Shanghai. Furthermore, India’s industrial production data for April will also be released later next week. In addition, global markets will want to pay attention to trade balance data in China and inflationary pressures for May in the US.
Selling pressure from foreign institutional investors (FIIs) will continue to dominate investor psyche as the cohort remained net seller of Indian equities for another week. Last week, FII’s net sellers amounted to Rs 3,417 crore bringing their total for the year to Rs 1.8 lakh crore. Their sales momentum slowed significantly last week, raising hopes that the cohort will soon be able to make net buyers in the market.
Helpful Technical Perspectives
The Nifty 50 index failed to stay above its 50-day moving average of 16,870 points on Friday, closing the day below that crucial level. “A long negative candle has formed on the daily chart after opening higher. Technically, this pattern indicates a bear-type candle (not a classic pattern) counterattack formation at high notes. But forming such a pattern amid a range of motion rules out any sharp negative impact from now on,” said Nagaraj Shetti, technical research analyst at HDFC Securities.
However, Shetti claimed that the short-term uptrend in the market is still intact and there is no sign of a reversal yet. Support for the index is likely to be around 16,350-16,400 points, while 16,800 points remain a key resistance.
What should investors do?
Mishra said: “The markets have witnessed a rebound in the past 3 weeks, but the decision lacks momentum due to ongoing challenges such as global tightening due to inflation, geopolitical tensions, etc. We think Nifty would regain some strength above 16,900, but a break below 16,400 will bring bears back in. Meanwhile, participants should focus on sector/stock selection as markets offer opportunities on both sides, but don’t go overboard.
The expert opinions and investment tips in this News18.com report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.
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