Nifty: D-street continued its recovery rally amid positive global cues; What lies ahead?

Markets showed positive trend in the last week amid positive signals from global markets. Besides the latest HSBC India PMI (Purchasing Manager’s Index) report shows that India's business activity extended its robust growth streak in August as a stronger services industry offset a slight slowing in manufacturing expansion.

The BSE Sensex gained 649 points, or 0.81 %, to 81,086.21 during the week ended on August 23. The Nifty jumped 282 points, or 1.15 %, to 24823.15. Sector-wise, the BSE Metal index was the top performers with a gain of 4.4 %, followed by BSE Healthcare index (jump 2.3 %) and BSE FMCG index (surged 2.2 %). On the other hand, the BSE Realty index declined by 2.9 % during the week.

As many as 39 stocks in the Nifty 50 index delivered positive returns for investors this week. With a weekly gain of 8%, Hindalco Industries emerged as the top gainer in the index. It was followed by SBI Life Insurance (up 5.9%), Bharat Petroleum Corporation (5.8%), and Bajaj Finserv (5.7 %). HDFC Life Insurance, Grasim, Bajaj Auto, Coal India, and Hero MotoCorp also advanced by over five percent. On the other hand, Oil & Natural Gas Corporation, Mahindra & Mahindra, and Tata Motors declined 3.2%, 2.8% and 1.3%, respectively.

Market Macros:

According to Vinod Nair, Head of Research at Geojit Financial Services, The Indian market continued its recovery rally this week, buoyed by positive US economic data, which diminished the likelihood of a US recession. Moreover, positive global sentiment from ceasefire talks between Israel and Hamas, along with a decline in crude prices, contributed to the rally. However, inflationary pressure in Japan and the appreciation of the Yen tempered the market’s gains at the end.

He added, in the week, IT stocks, which are reliant on the US market, ended marginally flat due to profit booking post the initial rally. PSU banks fully recovered losses from the last week, while mid- and small-cap indices outperformed the broader market.

The market is now awaiting the FOMC meeting minutes and the Fed Chair’s speech to have a confirmation on the rate cuts. “A rate cut of up to 25 bps in September is anticipated; if confirmed, will be taken positively by the market in the short-term. Further trend will depend on the optimistic view of the central banks that the accommodative policy will be sustained, guiding further cuts in the coming policies”, Nair said.

Nifty Outlook:

Market veteran Deepak Jasani, Head of Retail Research at HDFC Securities says, Nifty ended a muted session with little change on August 23, as market participants await the US Federal Reserve Chair Jerome Powell's speech at Jackson Hole gathering. At close, Nifty was up 0.05% or 11.7 points at 24823.2.

Nifty while rising for the seventh consecutive session, made a small negative candle on August 23 after a rise suggesting consolidation. “On weekly charts however, it rose 1.15% making a positive candle, filling the down gap made on Aug 05, thus nullifying part of the weakness. Nifty could now head towards 25100 on the upside in the near term while 24650 could provide support”, Jasani commented.

Bank Nifty:

According to Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investments, The Bank Nifty opened on a positive note but encountered trend line resistance, leading to profit booking, and eventually settled the day on a negative note at 50,933 levels. Technically, the Bank Nifty has formed a red candle near the trend line resistance around 51,200 levels. However, the index managed to hold above its 21-DEMA support, which is placed near 50,790 levels.

“On the weekly scale, the index has formed a bullish candle, indicating strength. As long as the index holds above 50,790, a "buy on dips" strategy is advisable. On the upside, trend line resistance near 51,200 levels remains a key barrier. Sustaining above 51,200 could open the path towards the 51,500 to 51,800 levels”, Yedve said.