Weekly Trend Report
- 03rd June 2024
Week Gone By
Indian markets experienced significant volatility in the monthly F&O expiry week, with the benchmark indices declining in three out of five sessions. Despite the overall weakness in markets ahead of exit polls and actual election results, favourable monsoon forecasts and robust domestic institutional buying helped limit losses. All sectoral indices ended on a negative note except Capital Goods, with the IT index shedding the most. The large-cap stocks such as Info Edge India, Avenue Supermarts, Hindustan Zinc, Tech Mahindra, and Zydus Lifesciences fell 7-10%, whereas Adani Power, Adani Total Gas, One 97 Communications (Paytm), Divis Laboratories, and Mankind Pharma gained 4-7%
Week Ahead
As we head into the crucial week, markets will react to a host of factors on Monday including exit polls, strong fourth quarter GDP data and the monthly automobile sales data. Thereafter, domestic markets will eagerly await the outcome of the Lok Sabha elections on June 4, 2024. The return of the ruling government would provide signal of economic policy continuity to markets. Additionally, the RBI will hold its MPC meeting this week, with the outcome scheduled on June 7, 2024. Following a strong GDP print on Friday, all eyes are set on any upward revision to the FY25 GDP forecast and more colour on the inflation trajectory going ahead. On the global front, China’s Caixin manufacturing PMI and US non-farm payrolls in the upcoming week has the potential to sway market sentiment.
Technical Overview
The benchmark index began the week under selling pressure. With the upper perimeter of the rising channel acting as stiff resistance, the price action was coerced into forming an intermediate top. The formation of a bearish engulfing candle pattern on Monday prompted a respite in the upside, and then the index witnessed follow-through sessions on expanding volume as the selling pressure intensified. The index pared 426 points from its previous weekly close and added 2 distribution days during the week. It ended the week with an inside bar that called a halt to the four-day streak of lower lows after finding immediate support at the 20-day MA, which is currently trading near 22477. The VIX traded at elevated levels continuing its 5 weekly higher closing streak. The market breadth turned frail during the week. The number of stocks trading above the 10, 20, and 50 daily MA dropped below the 50% threshold, indicating a dodgy intermediate trend. The momentum market breadth also softened during the week. However, the market breadth volume witnessed a continuance in expansion, indicating selective accumulation. Technically, the 10 weekly MA and 50 daily MA are trading near 22444 and 22396 making it a crucial support zone. The index is anticipated to invite further selling pressure on a breach below this support zone on a closing basis. In the coming week, we anticipate volatility persisting ahead of the election results and reckon to restrain caution, control leverage, and apply risk management techniques.
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