A man walks past the NSE (National Stock Exchange) building in Mumbai, India, December 27, 2016. Picture taken December 27, 2016. REUTERS/Shailesh Andrade - RTX2WSSY
It looks like bulls will remain in control of D-Street for June 2017 even though chances further consolidation cannot be ruled out after strong rally seen in the last two months.
In the last 6 out of 10 years, bulls managed to get an upper hand on D-Street. The Nifty rose 9 percent in the year 2012, followed by nearly 7 percent rise in 2010, and a little over 3 percent gain in the year 2014. The index rose nearly 1 percent in 2007, 2011 and 2016.
However, on the down, Nifty suffered its worst loss in the year 2008 when it crashed nearly 15 percent, followed by 5 percent drop in the year 2009, 1.6 percent fall in the year 2013, and nearly 1 percent fall in 2015.
The way index has moved so far in 2017 and especially in the last two months, suggests the rally has more upside, but a bit of consolidation cannot be ruled out in the short-term which could come after unfavourable Reserve Bank of India’s policy review meet and US Federal Reserve meet due later in the month of June.
But, for now, bulls remain control of D-Street and the momentum will gain traction once the index closes above 9,700 which has a maximum number of Call open interest of 49 lakh contracts.
The earnings season is almost over and macro data released last week was also failed to dent sentiment as gross domestic product (GDP) growth for the quarter ended slowed down drastically towards 6.1 percent.
“India's Gross Domestic Product (GDP) grew at a moderated rate of 6.1 percent in Q4 FY2017, which is the lowest in last nine quarters. The GDP growth decelerated sharply from 7 percent growth recorded in Q3FY2017 and 8.7 percent surge posted in Q4FY2016,” Saravana Kumar CIO LIC MF told Moneycontrol.
“However, in spite of this, market trajectory looks positive. I would not be surprised with Nifty crossing 10K mark in the month of June. Though it is an important psychological mark, from current market levels it is less than 5 percent away which is not a major challenge,” he said.
The biggest risk which equity markets across the globe face, including India is a rate by the US Federal Reserve and the future commentary by Fed Chief Janet Yellen. A more hawkish stance might fuel a risk-off sentiment in markets which could lead to some consolidation in Indian markets.
“We believe the outlook is becoming complex for the few trading sessions. We have three significant events that can have a major impact. The most significant of these is the mid-June FOMC meeting in the US,” Vijay Singhania, Founder-Director, Trade Smart Online told Moneycontrol.
“It appears increasingly likely that as part of policy normalisation, the Fed will hike the rate by 25 basis points. Most macro-data, including employment, are in positive territory. Relatively weak crude oil prices have contained inflation. A rate hike in the US will send gold prices hurtling down as it would boost the dollar as well as the equities market,” he said.
Technically, the Nifty movement will remain range bound indicating indecisiveness in the market atleast till the US Fed event.
However, a decisive close above 9,640 levels with significant volumes on breakout may help the prior bull trend to keep intact in the near-term.
“The supports for the index is placed at 9,580 followed by 9,530 while resistance is placed at 9680 followed by 9740 levels. We recommend have recommended clients to buy Nifty near 9630 levels for the higher targets of 9680-9700 levels, placing a stop loss below 9570 levels,” said Singhania.