Market participants are awaiting fruitful discussions in the Rajya Sabha in implementing the GST Bill, which has been listed for discussions this week
Heavily overbought markets corrected, especially when it came to large cap stocks last week. The daily RSI is placed very close to its dangerous range of 70. A sharp uptrend is not predictable, if there are no major positive triggers. Market participants are awaiting fruitful discussions in the Rajya Sabha in implementing the GST Bill. The GST Bill has been listed for discussions this week. The July Series Futures and Options will expire on July 28. There are huge shorts created by traders at the 8600 level. If that level has been taken off, then we can expect a sharp bump up and subsequently, Nifty may move towards the 8700 mark.
Nifty
The Nifty faces resistance at around the 8600 and 8700 levels. Support for the Nifty lies at 8452 and 8400 levels. If Nifty fails to get support, at these levels then it could test 8339, though there is a remote chance of that. Now, let us check the US markets. There is some more steam left in Dow Jones. The S&P 500 VIX which measures the undercurrent of the US market is at 12.02 per cent suggesting a very strong outlook. The Dow Jones has support at 18117 and has resistances at 18784 and 19000 levels.
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Stocks
Recently, we saw profit booking in front line stocks, but small cap and mid cap stocks continued to outperform the broader market. The BSE mid cap index is slightly overbought, which means selective buying can be expected in the coming days. In other words, quarterly numbers are going to play a crucial role in these two segments. You cannot expect all round buying in small and mid cap segments. IT counters are trading relatively weak, and BSE IT Index may find support at the 10235 level, which will offer an entry level for investors. Selective metal stocks will remain subdued after European metal producers stocks witnessed profit booking.
The data from the UK is not very encouraging, The Pound dipped below $1.32 post BREXIT. The UK Business activity also contracted post BREXIT, July Service PMI fell to a low at 47.40 from 52.1 in June versus a forecast of 48.90. The Manufacturing PMI though slipped below 50 but remained above the forecast of 47.8. Many large cap and mid cap companies are queuing up to announce their results. These major companies are Canara Bank, Eveready, KPR Mills, NAUKRI; ACC, Ajanta Pharma, Ambuja Cement, Bajaj Fin Serve, Bajaj Finance, Dr.Reddy, IDFC, Karur Vysia Bank, Maruti, V Guard; Asian Paint Bajaj Auto, Bharti Air, Dabur, Yes Bank; Blue Dart, Dish TV, Glaxo, Muthoot Fin, Syndicate Bank; Crompton, ICICI Bank, KTK Bank, Alembic Pharma, SPARC, UPL etc.
Data
The US authorities will publish US Continuing Jobless Claims and Initial Jobless Claims, this week. This macro data can affect the equity market sentiments and the US dollar. EU Zone macro data expected next week are Industrial Production, Unemployment rate, Balance of Trade, Consumer Confidence, Retail Sales and inflation. Market participants also will take into consideration Manufacturing PMI data from China. Bank Nifty remained in a range and profit booking was visible in public sector banks. This week, banking stocks may face some more volatility especially in public sector banks, before making a sharp up move. Banking Nifty has resistances at 19100 and 19308. The support levels are at 18500 and 18333. If there is a major sell-off in the public sector banking space, then one can add small quantities in the portfolios.
Both HDFC Bank and Kotak Bank came out with moderately good set of numbers last week. The out performance of auto stocks will come to an end in the short term, because of heavily overbought condition. Investors can book partial profits in this sector. The pharma sector will be in focus; Dr. Reddy Lab result can act as a key trigger for this sector.
Gold
Crude remained weak due to oversupply and lower demand. It lost ground but remained close to two-month low. Crude has minor support at $42.85 per barrel and it would face resistances at $44.93 and $46.40, per barrel. If there is a major sell off. then Crude may slip even further. Lower crude prices are favourable for oil marketing companies, which are already trading 52-week highs. Plastic furniture makers and aviation stocks are also likely remain firm.
Gold is weak due to the strong dollar and the monsoon in India, demand will pick up after August because of Onam. Gold has support at $1307.22 per troy ounce and resistances at $1337 and $1368 per troy ounce. Investors in the UK and EU are accumulating gold, post BREXIT on concerns of increased currency volatility. The recent IPOs have given very good returns, which in turn, will attract lots of investors to both, the IPO market and secondary markets.
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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