It is umbrellas out in Kochi thanks to the monsoon
Both the Sensex and Nifty made a new 52 week high and these Indices along with major global equity market Indices are likely to move up further towards strong economic growth. Nifty is likely to move towards 9,700 and may even be 9,750 in the short term. Support for the Nifty lies at 9546. A decisive move can cause further sell-off but chances are remote due to better than expected monsoon in the South and GST roll out by the beginning of July 2017. The introduction of GST will propel economic growth; our GDP can grow more than 7 per cent and will attract more fund flow to the country. So, it is prudent to take long positions rather than short in the futures segment of the Nifty. According to world markets, India will grow 7.2 per cent in FY 18 and further, more growth can be expected after GST roll-out. Global equity markets VIX are at 52 weak lows suggesting further uptrend. Domestic VIX is at around 11 indicates strong appetite for Indian equities. The recent uptrend in equity markets is mostly on strong liquidity.
Last week, macro-economic data which came out was not as expected but the market remained positive because of robust economic growth in the coming quarters. India's Q1 YO-YO GDP growth came down towards 6.1 per cent from 7 per cent. Infrastructure output in April came down to 2.5 per cent from 5.3 per cent on a Yo-Yo basis. The PMI also was down from 52.5 April to 51.6 in May 2017.
Bank Nifty supported the market uptrend last week, and it got support at 23,070 and 22,893. Bank Nifty has resistance at 23,725 and 23,500. Private sector banks and selective public sector banks may remain positive in the week. According to S&P Indian Bank's bad loan may rise to 15 per cent by March 2018. FMCG stocks outperformed on expectation of a strong monsoon. Good monsoon will keep the FMCG demand and higher price realisation. Frontline FMCG sector is also likely to benefit out of GST. Auto stocks both two wheelers and four wheeler manufacturing companies stocks will also get market attention in the short term.
Alex K Mathews
IT stocks may remain subdued for some more time, IT index is likely to get support at 10,484 and resistance at 10,764. Like IT, Pharma stocks may also remain weak; the only good news for this sector is that it has entered oversold territory, which can give support to the markets. Nifty metal stocks are expected to trade sideways in the beginning of the month due to weak technicals but later in the week, selective buying can be expected.
Dow Jones is bullish and expected to move towards 21,400 and 21,785 in the short term. Dow has support at 20,900 and 20,668. Like Dow Jones, Nasdaq looks very strong because of strong quarterly earnings. Strong U.S markets in spite of geo-political tensions will keep world equity markets firm. This, despite a possible rate hike.
Alex K Mathews is the founder of www.thedailybrunch.com
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