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MARKET OUTLOOK FOR THE WEEK: 04-07-2016

MARKET OUTLOOK FOR THE WEEK: 04-07-2016
July 04
08:19 2016

 

After heavy sell-off in the last week due to Brexit, markets recovered smartly from the day one and finally on Friday it closed at 8328. The recent surge is an early indication of a bull market if there is no negative news from the EU zone. Nifty has immediate resistances at 8375 and 8402, and probably minor profit booking and consolidation can be expected before the said extended move. Nifty has support at 8195 and 8125 levels. It is prudent to lighten up your long positions at around 8400 levels for a short term.

Dow Jones recovered from the lower levels after the tremor of Brexits, and it is likely continue to move up towards 18206 in the short term and later it can test 18500 levels. Dow has support at 17747. Dow Jones technical set will help the global equity markets positively.

Central government has agreed the 7th pay commission recommendations, nearly 47 lakh central government employees and 52 lakh pensioners will get the benefits. The commission also suggested Rs.18000 as the minimum salary. The new recommendations will cost the government an additional financial burden to the tune of Rs.1,02,000 cores. The policy will give boost to auto, consumer goods, real estate and even FMCG. Higher spending will revive the economic growth. The recent decision will have long lasting positive on Indian economy. Investors are also confident that the government will get majority for passing the GST in the parliament during the monsoon session.

Good monsoon across the country is also giving much confidence to the investors. Short covering ahead of the June Futures and Option expiry also supported the markets. The latest roll-over data of Nifty indicates strong market outlook for July series, July Nifty roll-over was higher than the previous three months average of 70% and it was at 78%. Most of the large cap stocks futures roll-over figures were also suggested the same trend. FII are also created fresh positions after the Brexit sell-off. S&P 500 VIX which measures the US market conditions has fallen towards 14.77% from earlier 26%. India VIX also retreated from the higher levels and on Friday it closed at 15.73%, indicates strong market outlook in the near term.

Last week IT stocks take a toll on Brexit, it is still in sell mode, where as sugar and tea sector stocks made a comeback. Tea stocks were in good demand due to shortage of tea arrival and higher demand, the price of 1 KG tea moved up by around 13% in the auction in the recent past. The price trend may continue for some more time. Sugar stocks since last 3 months were in demand, due to higher realisation because there is acute shortage of sugar exports from Brazil and drought in India. Fertilizer sector stocks are likely to move up once the monsoon showers pick up in the northern regions.

Auto sale numbers which came on Friday was mixed in nature, Maruti’s domestic sales dropped by around 10%, M&M achieved a growth of 7%, Escorts reported a sales growth of 12% and last but not least Ashok Leyland reported a sales growth of 7%. Banking stocks were in good demand last week, especially private sector banks and in the short term the uptrend may continue, but profit booking can also be expected may be in the second part of the week due to sharp uptrend which happened last week. Banking Nifty has resistance at 18136 and 18170. Support for the banking Nifty lies at 17739 and 17416 levels. After the technical correction banking Nifty can move up towards 18681. PSU Banking Nifty has support at 2716 and has resistance at 2788 and 2850.

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ALEX MATHEWS

ALEX MATHEWS

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