Monsoon forecast and foreign relations lift sentiment

French President Emmanuel Macron parades in the rain in a Citroen DS car on the Champs Elysees avenue, after his formal inauguration ceremony yesterday in Paris
French President Emmanuel Macron parades in the rain in a Citroen DS car on the Champs Elysees avenue, after his formal inauguration ceremony yesterday in Paris

The latest monsoon forecast by the IMD lifted the market sentiment, which took Nifty towards 9400. The much awaited corrections are not happening due to various positive triggers. Latest amongst these is a strong monsoon which can lift overall growth of the economy. The monsoon is expected to arrive in the Andaman and Nicobar Islands today, which is much ahead of earlier estimates. These sentiments were further boosted by the French election results. Emmanuel Macron’s win was huge for global equity markets sentiment.

Global gab
The current global geo-political situation improved after US President Donald Trump expressed his willingness to talk with the North Korean leader Kim Jong-un, "under the right circumstances" as he says. FII turned net buyers in bourses and retail investors, pumped good amount of money to the primary and secondary markets during these days helped the market in a big way. Going forward, Nifty may move towards 9488 and 9573. Intraday corrections are expected due to daily charts weakness. Support for the Nifty lies at 9315 and 9272. If Nifty moves down below 9272, it can cause further sell-off.

Volatility rules
Global volatility has been ruling at substantially lower levels in the last couple of weeks. S&P 500 VIX closed at 10.40 on Friday and domestic India VIX closed lower by 1.94 per cent at 10.62 suggesting further uptrend to the equity markets. As volatility continually trades at all time lows, be cautious, because it can start moving to the North if there is any bad news on the geo-political situation or anything similar. As Nifty is at an all time high, it is prudent to take new long positions with strict stop-loss.

Rain gain
Nifty IT stocks may remain slightly positive and selective buying can be expected this week too. The daily charts recovered from the oversold situation can cause minor profit booking in the second half of the week, but uptrend is still intact. Like the IT sector, the FMCG sector is also looking positive after the expected strong monsoon. A strong monsoon could help rural demand which is a positive trigger for fertilizer, pesticide, FMCG and two wheeler company stocks.

Moving sideways
Nifty Metal Index is weak but it is slightly oversold, so we can expect sideways to negative movements. It has support at 2854. Nifty Pharma index is entered into the oversold region and will gives us a buying opportunity at lower levels, especially at 10008 levels.

The latest IIP data was also impressive. After changing the base year to 2011-12, IIP rose to 5per cent. The manufacturing sector, mining sector and electricity sector reported a growth of 1.2 per cent, 9.7 per cent and 6.2 per cent respectively, and will help the market open firmly today. What is more, declining WPI inflation in April will also support the overall market sentiment.

Waiting game
Selected companies which are expected to come with quarterly earnings are Bata India, Chennai Petro, J K Tyre, T.K Paper, Shobha, Tata Steel, TN Petro, ALBK, HUL, JSW Steel, MRPL, Bank of Baroda, Jyothi Lab, Tata coffee, VIP Industries, Glaxo, Grasim, IFCI, Just Dial, KEC, SBI, Tata Power, V Guard and Zuari.

US Industrial Production, Manufacturing production and Initial Jobless claims data is due from the US. Unemployment Rate, Inflation rate, GDP Growth Rate and Balance of Trade data from the Euro Zone and Balance of Trade data from India is also awaited.

Alex K Mathews is the founder of www.thedailybrunch.com

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