The new UK Prime Minister’s moves will set the tone for what happens next on the Nifty and Sensex
After the substantial rise in indices it seems that the markets are likely to lose their upward momentum, especially since the Relative Strength Index (RSI) indicates the overbought situation of the market. The 14 day RSI of the Nifty stood at 66.4 and the daily RSI at 69 levels. Once RSI reaches at around 70 level, one can expect profit booking. Nifty has limited upside as of now, its immediate resistances are at 8578 and 8611.
Britain’s new Prime Minister Theresa May has become the country’s second female PM after Margaret Thatcher. Pic/AFP
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The support levels are at 8477 and 8431; a move below these two levels can cause further selloff, which can bring down Nifty towards 8315. We can expect weak opening of Nifty today, later it will bounce back but may not sustain at higher levels. The passing of the GST Bill during the monsoon session of Parliament will keep the market positive, which will begin today.
World market participants are very keen to see the policy decisions of UK Prime Minister Theresa May especially on Brexit. As the volatility of the markets are likely to increase in the days to come one should avoid writing off options.
Inflation
India’s inflation based CPI accelerated to 5.77 per cent in June 2016 from 5.76 per cent in May 2016. Increase of food price is the major contributor to the spike in CPI inflation. India’s consumer food price index rose to 7.79 per cent in June from 7.47 per cent in May 2016.
Value buying has been seen in the logistic sector ahead of the parliament session, but one should take utmost care while initiating long positions due to high volatility of this sector. Pharma, metal, auto and commodities sectors will give support to the market. IT, banking and metal sector will face profit booking most probably from tomorrow.
Lot of important economic data from the United States (US) and European Union (EU) are expected in this week which include continuing jobless claims, initial jobless claims from the US and unemployment rate, inflation rate, service PMI and manufacturing PMI from the EU.
US markets tested a record high on Friday and major indexes closed a third consecutive week of gains on strong economic data and beginning of earning season. US retail sale rose more than street expectation. After the trading hours, S&P 500 futures fell after reports of a military coup underway in Turkey. Turkey ETF which tracks Turkey markets dropped by around 6.9 per cent.
Dow Jones
Dow Jones closed on Friday at 18516 and it has supports at 18300 and 18133. Dow will face resistances at 18642 and 18762. Dow Jones RSI is at 67, which is also very close to its overbought zone.
Bank of England left key rate unchanged at 0.5 per cent after the monetary policy review on July 14, 2016 which supported the EU zone markets. The good news for the market was India’s widening trade deficit which has contracted after a long time. Indian exports rose 1.3 per cent and imports declined by around 7.3 per cent.
Large number of Nifty 50 and mid cap companies will release their quarterly earnings this week, which includes Gruh Finance, Exide Industries, HUL, Mind Tree, Ultratech, Wipro, Crompton Greaves, Kitex, SKF India, ABB, Biocon, Cairn India, HDFC Bank, Kotak Bank, Axis Bank, Federal Bank, M&M Finance etc.
Gold retreated in the last week after a surging US dollar and subdued consumer inflation data. In the last seven trading sessions, gold lost nearly 2 per cent in value. Gold has support at $ 1320 and $ 1310 per troy ounce, and it could face resistances at $ 1341.70 and $ 1355.30 per troy ounce.
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