Weekly Trend Report
- 18th June 2024
Week Gone By
The domestic market concluded the week on a high note, surging to fresh record highs, with both indices continuing their upward trajectory for the second consecutive week. During the week, the broader market rallied, surpassing the main indices and reaching new life highs. The Nifty settled above the 23,450 mark. India’s foreign exchange reserves surged to a new record high of $651.51 billion for the week ending May 31st, according to the RBI. India’s annual inflation rate based on the Consumer Price Index (CPI) fell to 4.75% for the month of May 2024, according to government data. India’s industrial production showed strong growth of 5% in April 2024. India’s Wholesale Price Index (WPI)-based inflation rose to 2.61% in May 2024, marking a 14-month high. This increase contrasts with the sharp decline experienced in the same month last year when WPI recorded a reading of -3.48%. Market expectations for May 2024 were around 3%, highlighting the actual inflation rate was slightly lower than anticipated but still notably high. Meanwhile on the global front, On expected lines, the Federal Reserve kept its key interest rate unchanged at 5.25% to 5.5% at the end of the two-day policy meeting on Wednesday. The rhetoric of any change in monetary policy outcome being driven by incoming economic data, especially consumer price inflation and labour market data, still holds true.
Week Ahead
Eyes are set on the union budget in July, with rumors of a rural spending boost potentially perking up consumer stocks. Until then, expect some consolidation as foreign investors wait for cues. High valuations may cap gains, but bargain hunters eye dips. This underlying support, along with steady mutual fund inflows, could keep the markets afloat. Investors remain watchful of foreign and domestic flows to gauge sentiment, while crude oil prices remain a wild card, impacting inflation and central bank decisions.
Technical Overview
- The week that went by was in stark contrast to its penultimate week as the 50 index remained in an extremely narrow range. In the week before, the markets reacted with high volatility swaying 2057 points.
- On four out of the five trading sessions in the week gone by, the index came off by over 100 points from its day’s high.
- The VIX index also cooled off by another 24% to 12.82.
- While the price action closed near to record highs, it currently trades at a distance of 2.5% above the mean.
- On the market breadth front, the populace of stocks trading above their 10 and 20 daily MA have entered the overbought territory. While those above 50 and 200 daily MA remain in the bullish zone above their 50% threshold.
- The momentum market breadth remained positive with above average breadth volume citing modest accumulation.
- The weekly RSI continued to show bearish divergence failing to mark fresh highs unlike the price action.
- The Nifty 50, Midcap, and Smallcap indices are anticipated to be trading at stretched levels with positive sloping moving averages, culminating in a further sideways trend that will allow to garner bullish strength in the intermediate term.
- The overall bias remains positive. A sideway to mildly profit taking bouts will be an opportunity to buy the dip.
- With a truncated week ahead, the markets would adjust to global trade setup on Tuesday. The zone of 23550-23650 is anticipated to act as immediate resistance zone while the support comes in near 23150-23000. A breach below 22850 would warrant a caution.
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