Mr. Mustafa Nadeem, CEO, Epic Research:
The Equity market extended gains on the back of expectation of positive result for upcoming election as Volatility cooled down and buying was seen in the broader market. The Bank Nifty clearly emerged as the leading sector extending upside with more than 3% gains while Nifty managed to add more than 1.3%.
A clear break was seen after the previous week of consolidation on the back of positive global and domestic cues. The INR Depreciation and rising crude prices continue to haunt around the equity market.
The benchmark indices rebound after a prolonged consolidation between the broader range of 10760 to 10600. A mild correction was observed as the confluence of levels played its part as resistance at 10760 along with global cues. The US calls on Iran Nuke Deal to back away caused a spurt in Crude prices and inversely hit Indian rupee to devalue and increase concerns over fiscal deficit. Rising crude prices tend to push inflation higher and hurt fiscal deficit of the Indian economy which is the second biggest importer of crude. The dust settled down as global markets rebounded midweek and saw some buying on the back of positive data from China and US.
Benchmark indices were basically in a range bound while a few heavyweight sectors stretched the undertone on the positive side. The Banking sector, specifically, Private banks and Financials saw good addition in open interest for consecutive days and added breadth to the overall market. Despite weakness in PSU Banks bank Nifty managed to breach and close over 26400. The next level technically for Nifty is at 10900 which if taken out on closing basis then bulls will try to target the Top at 11172. on Downside the previous zone of support is now shifted to the upside at 10650 - 10700. These should be held for bulls to sustain else a mild weakness can be observed. Bank Nifty is having support at 26200 - 26100 while the upside is open for bulls to 26700.
Going forward we expect the Financials, private banks to lead along with buying coming in IT stocks and FMCG. The FMCG and IT may add more flavour for bulls since IT has seen some mild correction while lower level buying continues to come in. The FMCG is seeing buying in its major heavyweights and see some buying in heavyweights like Hind Unilever and ITC.
The elections are always seen as a point of confidence in the existing government and its future and longevity, not to mention that we are 1 year due from centre elections and a few months away from state elections. This is already given a thumbs up since we have seen managed buying in Index for the last couple of weeks with a return of more than 8% in a matter of this time. this is definitely positive signs and discounting of positive news. Though Volatility may still come in for a short period of time since some profit booking can be triggered. Though, with positive data from last month rollovers and overall improved breadth, any correction will be utilized by bulls.
Currency Market is seeing huge activity amidst ongoing geopolitical tension and rising crude prices. The recent missile exchange between Iran and Israel has further pushed oil on a higher trajectory. USD INR is at breakout level of 67.50 - 67.60. If his level is taken out then we may see next levels on the upside to 68.5 - 69. These levels will further mark a breakout of bullish pattern and target may come higher to that of its all-time high of 69+. On Downside, support is seen at 66.8 - 67 for USD INR. A strengthening dollar against the basket of currencies due to ongoing geopolitical tensions is further adding fuel to rupee depreciation for the last couple of days.
Crude oil amidst the global geopolitical tensions, supply-side constraints and rising tensions in countries that are one of the major producers is kicking in buying at every lower level. We expect crude prices to test higher level with some mild corrections of 4-5%. Any lower level will be an opportunity to enter for higher targets of $74 - $75.