Dalal Street slips from all-time highs amid profit booking, negative cues from global markets. What lies ahead?

Extending the previous week’s gaining momentum, key Indian benchmark indices ended in the green territory on Friday, as India's gross GST revenue collection numbers and continued foreign fund inflows boosted the investor’s sentiments. 

However, Dalal Street slipped from its record highs amid increased selling pressure and negative cues from global markets that have trimmed the weekly gains.

Markets made an optimistic start to the week as investors gained confidence with GST collections rising 12 per cent to over Rs 1.61 lakh crore in June. The gross GST collection has crossed Rs 1.60 lakh crore mark for the fourth time since the roll out. 

Besides, provisional data by the Reserve Bank of India showed India's services exports in May climbed 7.7 per cent on year to $27.06 billion, while imports rose 2 per cent to $15.5 billion.  

However, selling on the final day of trade ate half of the weekly gains as stronger-than-expected jobs data in the US spurred concerns of further monetary policy tightening by the US Federal Reserve. 

Besides, escalating US-China tensions, and rising recession fears as Chinese data showing industrial activity weakened in June could dent market sentiment.

The BSE Sensex surged 562 points, or 0.87 per cent, at 65,280.4 during the week ended July 07, while the Nifty gained 143 points, or 0.74 per cent, to 19,331.8. As many as 33 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a gain of 8.2 per cent, Hero MotoCorp emerged as the top gainer in the index. It was followed by Mahindra & Mahindra (7.6 per cent), Bharat Petroleum Corporation (7.4 per cent), Bajaj Finance (6.5 per cent), and Bajaj Finserv (5.7 per cent). Tata Motors, ITC, State Bank of India, Reliance Industries, and Titan Company also advanced by over three per cent. On the other hand, Eicher Motors, UPL, and Tata Consumer Products declined 11.1 per cent, 3.5 per cent, and 3.1 per cent, respectively.

Sector-wise, the BSE Oil & Gas index surged the most (3.9 per cent) during the week gone by. While BSE Realty and BSE Auto indices have registered a weekly gain of 2.2 per cent, and 1.9 per cent, respectively. On the other hand, BSE Information Technology and BSE Capital Goods indices have registered a weekly decline of 0.1 per cent each.

Market Macros: Vinod Nair, Head of Research at Geojit Financial Services said, the domestic market started off the week on a positive note, while negative global cues disturb the mood by the end of this week. “Economic activities showed signs of strength, with the manufacturing PMI expanding to 57.8, indicating sustained demand and boosting confidence in the manufacturing sector's prospects”. Additionally, provisional business numbers from banks, automakers, and real estate companies bolstered investor confidence, while FIIs provided additional support to the domestic market.  

On the global economy, Nair said “Heightened trade tensions between the US and China, along with uncertainties stemming from the hawkish FOMC minutes, tested the risk appetite of global investors. The sharp increase in US private payroll data led to expectations of a prolonged high-interest rate environment, resulting in a spike in US bond yields and increased volatility in global equities.

He added that market participants are eagerly awaiting key data points such as domestic and US inflation numbers for further insights into the sustainability of the market trend. “Given the elevated market valuation, the profit booking is visible at the upper band of the rally,” Nair said.

Technical Outlook for next week:

Devarsh Vakil, Deputy Head - Retail Research, HDFC Securities said that the markets take a "U" turn after hitting fresh all-time highs. “Nifty broke the 8-session winning streak by falling 0.85 per cent to close at 19331.80. Both Nifty and Bank Nifty breached 5 days EMA support in today’s session.” Nifty Midcap 100 and Nifty Small Cap 100 Index corrected along with the Benchmark Indices today which fell by 0.81 per cent and 0.44 per cent. Advancing shares outnumbered the declining shares where the advance-decline ratio stood at 0.77 on BSE, the lowest since 23 June.

Vakil added, going forward 19500 has become strong resistance for Nifty and unless that is taken out, traders should remain cautious. “Support for the Nifty is seen at 18900-19000 band. Bank Nifty ended the week with a bearish “Shooting star” candlestick pattern on the weekly chart, which is a short-term bearish trend reversal pattern” he said.

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