Indian equity indices ended a volatile week on November 2 with minor cuts as re-emergence of concerns over the US Federal Reserve’s rate hike trajectory and lower-than-expected growth in the June quarter GDP weighed on sentiment. The Nifty 50 and Sensex closed the week ended September 2 with marginal losses after the US Federal Reserve Chief Jerome Powell reiterated the central bank’s commitment to rein in runaway inflation and suggested that another 75-basis-point rate hike at the upcoming meeting may be warranted.
Experts said, in the absence of major domestic events, equity markets will be driven by global trends, foreign fund flows and movement in the Brent crude oil. The major global events this week are the European Central Bank interest rate decision and China’s inflation rate, they added.
There is not much on the domestic front to digest therefore the direction of global markets will play an important role in the direction of our market,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Besides, PMI (Purchasing Managers’ Index) data for the services sector for August which is scheduled to come on Monday, will also influence trading.
“In absence of any major event, participants will be eyeing global markets for cues. Besides, the trend of foreign flows will be on their radar,” Ajit Mishra, VP Research, Religare Broking Ltd, said.
FII Flows
After pouring in over Rs 51,000 crore in Indian equities last month, FII flow has been erratic in the last two trading days amid increasing dollar index and US bond yields.
Dr VK Vijayakumar of Geojit Financial Services said FIIs are likely to continue investing in India. “They have learned that exit is easy, but entry is expensive,” he said.
Macros
After recording 13.5 per cent growth in real GDP in the June quarter, India surpassed the UK to become the world’s fifth largest economy. On Monday, India’s PMI data will be released. Investors would also be eyeing the US PMI data and US initial jobless claims data for more cues. On September 8, the European Central Bank is set to announce its rate decision.
Across the globe, investors will be keeping a close watch on China’s inflation numbers as well.
Rupee
The volatility in the foreign exchange market may take its toll on sentiment in the equity market. With foreign participation drying up in the previous week in the equity market on the back of US Fed’s hawkish commentary, the rupee ended the week on a weaker note against the US Dollar. The US Dollar index has seen a recent revival and surged to a 20-year high against a basket of major currencies last week.
“We expect rupee to remain weak compared to the US dollar on concerns over fresh COVID-19 lockdown in parts of China. Concerns over global economic slowdown and overall strength in Dollar may also put downside pressure on Rupee,” said Anuj Chaudhary, research analyst at Sharekhan.
F&O Cues
On the Option front, there wqshave seen maximum Call open interest at 17,500 strike followed by 18,000 strike, with Call writing at 17,600 strike then 17,500 strike, while the maximum Put open interest was seen at 16,000 strike then 16,500 strike, with Put writing at 17,600 strike followed by 16,000 strike.
The above Option data indicated that the Nifty may remain in an immediate trading range of 17,500-18,000 levels.
The banking index gained more than one percent during the last week and formed bullish candlestick pattern on the weekly scale. Hence, if the index closes above 40,000 mark then there could be uptrend towards record high levels, experts said.
Nifty Technical Outlook
Apurva Sheth, Head of Market Perspectives, Samco Securities said Technically, the Nifty50 index began the week with a large gap down, following negative cues from international indices, but regained most of its losses. It closed slightly negative/unchanged. After a sharp rise from 15,200 to 18,000, the benchmark index is now consolidating.
At the moment, the level of 17,150 is likely to serve as a key support zone, the analyst at Samco Securities stated, recommending that traders maintain a bullish bias and buy on dips as long as the mentioned support is protected.
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