Bulls are taking a breath after a strong run-up but they are still holding baton to continue their march towards a new milestone as there are no signs of weakness in the Indian markets. Muted institutional flows are leading to some consolidation in the market but there is decent buying in many quality midcap and smallcap stocks beneath the flat headline indices.
Most of the global markets are also in a consolidation mood while Japanese markets are showing good strength to outperform the developed markets. Global cues will continue to impact our market's behaviour and there are some macroeconomic data announcements that are lined up next week like China's industrial production, US inflation numbers. China's industrial production data for August will be announced on September 15. The US will announce the inflation rate for August on September 14, 2021. US retail sales for August will be announced on September 16, 2021.
On the domestic front, the Wholesale price index (WPI) inflation for August 2021 is due on September 14. The market also has an eye on the progress of the monsoon as we are in the last phase where it has picked up momentum in September after a weak August.
The dollar index is again cooling off after facing resistance at the 92.8 mark and if it continues to fall from here then we can again see FII buying to pick up which may help headline indices to gain momentum for new highs. Rising Covid cases in many countries could be a challenge but the markets are ignoring it as of now because of liquidity and strong economic recovery.
Technically, Nifty is in a strong bullish momentum but it ended last week with a small indecisive Doji candlestick formation. Last week's high and low of 17,436 and 17,254, respectively, will be important reference points where if Nifty starts to trade above 17,436 level then we can see levels of 17,600/17,750 in the coming days while a move below 17,254 can lead to some short-term weakness where 17,050/16,900 will be the next support levels.
Meanwhile, Bank Nifty is still underperforming as investors have Fin-Tech companies as an alternative investment option to traditional banking business but it may catch up momentum soon. It is consolidating above its 20-DMA of 36,088 where 37,000-37,250 is an immediate resistance zone; above this, we can expect a move towards the 37,700-38,000 zone. On the downside, 36,000 is strong support; below this, we can expect any weakness towards 35,500/35,000 levels.
Looking at the derivatives data, FIIs' long exposure in the index futures stands at 63 percent while Put-Call ratio (PCR) is sitting at 1.45 level and both are looking in a comfortable zone.
If we talk about the sectors then the chart of the Nifty PSE index is looking strong means PSU stocks may outperform from here and ONGC, Oil India, and Gail are looking interesting amid bullish momentum in global natural gas prices. Other than the PSU sector, metal stocks may also catch up momentum as global markets are benign whereas metal prices are seeing a rise due to cool off in the dollar index where Hindalco may continue to outperform due to strength in aluminium prices.
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