Markets continued to rally for the second week as benchmark indices gained 0.5-1 percent in the volatile week ended May 27.
For the week, BSE Sensex rose 558.27 points (1.02 percent) to close at 54,884.66 while the Nifty50 gained 86.35 points (0.53 percent) to end at 16,352.5 levels.
On the sectoral front, BSE bank index added four percent and BSE auto index rose 3.3 percent. On the other hand, metal index shed eight percent, oil & gas index slipped 3.6 percent and realty index fell 3.2 percent.
The broader indices underperformed with BSE small cap index shedding 2.7 percent while mid cap and large cap indices ended on a flat note.
"The Nifty consolidated within a broad range of 15900-16400 during the week but recovered from lows on expiry day and continued the momentum on the last trading session to end above 16350 with gains of over half a percent," said Ruchit Jain, lead research, 5paisa.com.
“In last three weeks, the index has consolidated within a broad range and Nifty has ended around the higher end of the range. However, the relative outperformance from the Bank Nifty index was encouraging and it has already given a breakout from its resistance on the expiry day and has continued its outperformance.
"In the recent corrective phase, Nifty has resisted around its 20 day EMA on pullback moves and it has ended marginally above that average on Friday.
"We expect Nifty to continue its pullback in the coming week as well and thus we could see some larger retracement of the previous correction. The initial retracement resistance will be seen around 16550 which we expect to get tested soon. Above that, the 61.8 percent retracement which coincides with 200 DEMA is around 16750. On the flipside, 16200 followed by 15900 will now act as support on any declines. Traders are advised to trade with a positive bias for the coming week and look for stock specific approaches where we could see good opportunities," Jain added.
Foreign institutional investors (FIIs) continued selling as they offloaded equities worth of Rs 9,688.62 crore while domestic institutional investors (DIIs) bought shares worth of Rs 11,257.63 crore.
In the month of May so far FIIs have sold equities worth of Rs 53,790.99 crore and DIIs have bought shares worth of Rs 47,465.90 crore.
In this week gone by, 90 smallcap stocks fell 10-30 percent including Rupa and Company, Godawari Power & Ispat, Globus Spirits, Jindal Stainless, Indian Metals & Ferro Alloys, Birla Tyres, and Future Retail.
On the other hand, the stocks that gained 10-30 percent included Lumax Industries, Banco Products (India), Sterling Tools, Antony Waste Handling Cell, Bliss GVS Pharma, AstraZeneca Pharma, AIA Engineering, and Jindal Poly Films.
"Following the impact of the government’s fiscal measures, the domestic market started the week on a negative note. Although, these measures by the government and the Reserve Bank of India (RBI) will help control inflation in the long term, they will have a cascading effect on the market and economy in the short to medium term," said Vinod Nair, head of research at Geojit Financial Services.
"Towards the end of the week, the market was able to recoup losses following favourable retail earnings in the US and reduced foreign institutional investor (FII) selling. For this to sustain, action undertaken by the US Fed and RBI in June will be an important factor.
"The market expects another 50 basis point hike by the Fed and 35 bp rise by the RBI. If the tone of future monetary policy is more moderate than anticipated, it will have a positive effect in the short to medium term while a more hawkish stance will reduce the shelf life of the trend," he added.
Among midcaps, gainers were Container Corporation of India, Torrent Pharmaceuticals, Bayer CropScience, Godrej Industries, Ashok Leyland, and Jubilant FoodWorks. On the other hand, losers were Jindal Steel & Power, Steel Authority of India, ICICI Securities, Oil India, Amara Raja Batteries, and Motilal Oswal Financial Services.
BSE 500 index ended flat. AstraZeneca Pharma, AIA Engineering, Container Corporation of India, Brightcom Group, Aster DM Healthcare, Dr Lal PathLabs, Deepak Fertilizers and Petrochemicals Coporation and Torrent Pharmaceuticals rose 10-15 percent.
On the other hand, Jindal Stainless, Jindal Stainless (Hisar), Divis Laboratories, Vardhman Textiles, Jindal Steel & Power, Equitas Small Finance Bank, Vaibhav Global, Welspun Corp, and Suzlon Energy lost 15-23 percent.
"Strong buying interest was seen in banking and financial stocks as a result the Bank Nifty index rallied 3.85 percent. Metal index corrected sharply over nine percent. Technically, after a short term correction the index took support near 15900/53500 and bounced back sharply. It also formed a higher bottom formation on daily charts which is broadly positive for the short term," said Amol Athawale, deputy vice president, technical research, Kotak Securities.
"In addition, after a long time it succeeded to close above 20 day SMA. We are of the view that the short term texture of the market has changed to positive from negative.
"For the trend following traders now, 16200/54450 would be the key level to watch out for, above which it could touch the 16500-16650/55300-55500. On the flip side, below 16200/54450 uptrends would be vulnerable. Below the same, the index could retest the level of 16000/53900. Further downside may also continue which could drag the index up to 15900-15850/53600-53500," Athawale added.
Where is Nifty50 headed?
Yesha Shah, Head of Equity Research, Samco Securities:
The manufacturing PMI (purchasing managers' index) figures for China and the consumer confidence index for the US will impact global markets next week. In India, amidst global recessionary worries, data on GDP growth for the fourth quarter of FY22 is eagerly awaited. Due to commodity price increases, a fall in wheat yields, and pressure last quarter on contact-intensive services, GDP growth is largely predicted to be lower than in the previous quarter.
Sentiments may worsen if growth falls short of predictions. Apart from the GDP print, monthly sales of auto companies will also be in the limelight.
Given the series of data releases, the coming week will undoubtedly be eventful and investors are recommended to exercise caution.
Manish Shah, SEBI-registered Investment Advisor
Nifty needs to move above 16400 if the rally has to continue. The sideways action in the last two weeks has resulted in Nifty showing an ascending triangle. A breakout from 16400 will mean a significant development for the market, opening a gateway to 16800-16900. We are possibly looking at a major low in Nifty.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One
We are back to the higher end of the recent range, that is, 16400 and it would be interesting to see whether the Nifty surpasses it or not. It’s a matter of time and we would see Nifty traversing this level to test 16600 – 16800 in the coming week.
Despite all this, we are still not completely out of the woods yet because globally things are yet to stabilise. Hence, we advise traders not to get complacent and keep assessing the situation on a regular basis. As far as immediate support is concerned, 16200 followed by 16000 should provide cushion to any intra-week weakness. Hopefully, global markets will come out of the challenging phase soon, which will attract strong buying in our markets going ahead.
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