Sensex, Nifty: Selling on Friday wiped-out weekly gains amid profit booking ahead of Union Budget. What lies ahead?

Selling on final day of the week wiped-out most of the weekly gains and forced markets to settle with marginal gains as traders avoided to take aggressive fresh positions ahead of Union Budget 2024-25 to be announced on July 23.  

Besides India’s retail inflation rose to four-month high of 5.08 percent in June compared with 4.75 percent in the previous month. On the other hand, wholesale inflation rose to a 16-month high of 3.4 percent in June compared to 2.6 percent in the previous month. 

The BSE Sensex gained 85 points, or 0.11 percent, to 80,604.65 during the week ended on July 19. The Nifty rose 29 points, or 0.12 percent, to 24,530.9. Sector-wise, the BSE Information Technology index and BSE Fast Moving Consumer Goods index were the top performers with a gain of 2 percent each, followed by BSE Realty index (gain of 0.2 percent). On the other hand, the BSE Capital Goods index declined by 4.5 percent during the week.   

Seventeen stocks in the Nifty 50 index delivered positive returns for investors this week. With a weekly gain of 5.4 percent, SBI Life Insurance Company emerged as the top gainer. It was followed by Infosys (up 4.7 percent), Oil & Natural Gas Corporation (4.1 percent) and Hindustan Unilever (4.0 percent). State Bank of India, ITC and Tata Consumer Products also advanced by over 3 percent. On the other hand, Tata Steel, JSW Steel, and Hindalco Industries declined 6.5 percent, 4.8 percent and 4.2 percent, respectively. 

Market Macros: According to Vinod Nair, Head of Research at Geojit Financial Services, the progress in the earnings season and the rebalancing of investor portfolios ahead of the union budget have influenced the market this week. “Additionally, a global IT outage has caused disruptions in various Indian industries due to issues with computers running on Microsoft. This has impacted the airline services and uncertainty across major economies, banks, and financial services, capping off a turbulent week in the markets,” he said. 

Nair feels that though the expectation for Q1FY24 earnings has subdued, the above-expected results from the IT majors provide scope for an upgrade in earnings for FY25. This has attracted more FII inflow to the IT and other defensive large-cap sector pharma and FMCG spaces. Further, the market direction will be determined by upcoming Budget outcomes. “Investors are anticipating pro-industry and populist measures with prudence on fiscal. If the budget meets the expectation, it will provide more stability in the market,” Nair added. 

Nifty Outlook: Market veteran Deepak Jasani, Head of Retail Research at HDFC Securities, said Nifty reversed sharply on July 19 after making a fresh high early in the day. The uptrend reversed on the fifth day as profit booking set across the market ahead of the Union Budget 2024. At close, Nifty was down 1.09 percent or 269.9 points at 24530.9. Cash market volumes on the NSE was down 8.8 percent hindered by tech outages. Broad market indices fell more than the Nifty even as the advance decline ratio fell to 0.18:1, the lowest in 1.5 months. 

Jasani added that most Asian indices were down on July 19 amid persistent concerns over a renewed trade war between the US and China and as signs of economic weakness overwhelmed the market’s optimism surrounding interest-rate cuts. European shares fell on Friday and were set for weekly losses, impacted by lower commodity prices and as a collapse in global technology shares weighed, even as airlines, media companies, banks and telecoms firms around the world said system outages were disrupting their operations. 

“Nifty formed an engulfing bear pattern on daily charts giving up all the gains of the previous session. It gained 0.12 percent over the week but formed a bearish shooting star type pattern and closed near the week’s low. The high of the day i.e. 24,854 could now be a strong resistance for the near term while 24,087-24,344 band could provide support”, Jasani commented. 

Bank Nifty: According to Rupak De, Senior Technical Analyst at LKP Securities, said Bank Nifty closed at its day’s low, forming a bearish candlestick on the daily chart. The active call writing and put covering suggest weaker sentiment. “Traders should maintain a sell-on-rise strategy, with resistance at 52,500. Bullish positions are recommended only if the index closes above 52,500. Further weakness is expected if it closes below its 21-day EMA at 52,000,” De said.