Weekly Trend Report
- 15th July 2024
Week Gone By
Domestic equity indices continued their upward trajectory for the sixth consecutive week. The Nifty settled a tad above the 24,500 level. The broader market edged higher in two out of five trading sessions during this week. Meanwhile, India’s foreign exchange reserves surged to a record high of $657 billion the week following its inclusion of bonds in the JP Morgan Emerging Market Index. On the global front, Chinese consumer inflation declined amidst economic concerns, limiting spending, while producer inflation continued its 20th consecutive month of contraction, albeit at a slower pace. Consumer price index inflation grew by 0.2% year-on-year in June, down from 0.3% in the previous month. Additionally, in the US, the economy added 206,000 new nonfarm jobs in June, surpassing economists’ forecasts. However, the unemployment rate unexpectedly rose slightly to 4.1%.
Week Ahead
Both foreign and domestic institutional investor activity will be tracked alongside crude oil prices to gauge overall market sentiment. India’s Union Budget in July is a key event, with hopes pinned on growth-oriented policies. The Q1 FY25 earnings season also begins this month, adding another layer of influence. India’s Industrial production data for May and inflation rate June will be released on 12th July 2024. China’s inflation data will also be released on 10th July 2024.
Technical Overview
- The benchmark index started the trading week with little change and remained within a narrow range of 320 points. The 5-day exponential moving average provided immediate support.
- On Friday, after a period of reduced volatility, the price broke above the weekly trading range, reaching highs of 24592 and closing above the psychological mark of 24500.
- This led to a strong follow-through in price action after surpassing the weekly Bollinger band, marking the 6th week of higher highs. The VIX closed 8.1% higher for the week, but its upside was limited by the shorter-term weekly moving averages.
- The RSI for both daily and higher timeframes continued to indicate overbought conditions without any divergence from the price, demonstrating momentum in the price trend.
- The week concluded with broader indices and major sectors showing a confirmed uptrend, with the media sector displaying strength as it attempted to rally with positive and improving momentum.
- The number of stocks trading above their 10- and 20-day daily moving averages decreased from the overbought levels seen earlier, but those trading above 50 and 200 DMA continued to remain above the 50% threshold, which is a positive sign.
- However, on the momentum breadth front, the market breadth volume remained modestly positive, indicating selective accumulation and movement among weaker stock participation. This emphasizes the importance of cautiously initiating fresh long entries.
- Currently, from a technical standpoint, the index is receiving immediate support at its 5 and 10-day moving averages, which demonstrates momentum in the trend. However, it is important to exercise caution if the index breaches below the average line.
- Nifty is expected to remain in a broad range. On the derivatives front, there was an increase in open interest for the 25000CE strikes, indicating a strong resistance zone. A breach below the support of 24000 could potentially lead to further selling pressure.
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