Weekly Trend Report
- 02nd September 2024
Week Gone By
During the week, India’s benchmark equity indices experienced a second consecutive week of losses due to global and domestic macroeconomic factors. Domestic shares tanked during the week, mirroring a global rout sparked by fears of a US recession. Worries over slowing economic growth, fuelled by weak US jobs data, sent market shockwaves. Additionally, the RBI decided to keep the repo rate unchanged at its August MPC meeting, reflecting India’s robust growth despite uncertainties in weather, geopolitics, and AI-driven tech disruptions. The benchmark was lower for three of five trading sessions: the BSE Mid-Cap index and BSE Small-Cap index skid. The Nifty settled below the 24,400 level. Sensex fails to hold 80,000 level. We expect volatility to continue in the near term amid persistent concerns over Middle East tensions, fears of a probable recession in the US and after-effects of the Yen carry trade unwinding.
Week Ahead
During the upcoming week, The ongoing June ’24 quarter earnings season will remain the centrepiece. Global cues and FII/DII flows will influence market direction. Inflation numbers in the US would be on investor’s radar. On Tuesday, the 13th of August, the producer price inflation will be released, and Consumer price inflation numbers will be announced on Wednesday. In Asia, Japan’s GDP numbers are scheduled for release on Thursday. On the same day, China’s industrial production figures would be announced. The latest reading marked the second straight month of moderation in industrial output, with growth hitting its lowest since March, mainly due to a slowdown in manufacturing activity as economic recovery stayed fragile.
Technical Overview
- At the outset of the trading week, the stock index experienced continued selling pressure, aligned with global market conditions.
- However, as the week progressed, the index exhibited signs of stabilization, with the 50-day moving average serving as immediate support.
- Throughout the week, the index oscillated within the trading range established on Monday, demonstrating improved stock participation. By the end of the week, the index surpassed this range, albeit concluding without a definitive bias.
- Concurrently, the Volatility Index (VIX) declined by 33% from its weekly peak, signaling a reduction in market pessimism.
- The majority of thematic and broader indices concluded the week with upward momentum under pressure, barring sectors like consumption, FMCG, Pharma, Energy, and Oil and Gas, which exhibited confirmed upward trends. Notably, the Media index also displayed considerable improvement in its trend.
- In terms of market breadth, stocks trading above their respective 10-day and 20-day moving averages rebounded from oversold levels, yet remained below the 50% threshold.
- Conversely, stocks trading above their 50 and 200-day moving average notably continued to maintain levels above the 50% threshold, indicating a positive trend.
- This suggests that the primary stock trend remains intact while the intermediate trend displays initial signs of improvement.
- Although momentum breadth faltered at the beginning of the week, a modest recovery ensued, resulting in an improvement in the 5-day ratio.
- From a technical perspective, the 50-day moving average, serving as institutional support, implies a potential pullback. However, confirmation of this requires a follow-through in price action, potentially classifying the recent sell-off as a transient event.
- Validation of a pullback necessitates a decisive close above 24720. In such circumstances, it is prudent to adopt a stock-specific approach with stringent risk management, or alternatively, await further confirmation while retaining market positioning.
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