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MARKET OUTLOOK FOR THE WEEK: 01-08-2016

MARKET OUTLOOK FOR THE WEEK: 01-08-2016
July 31
15:12 2016

Nifty made a new 52 week high on last week, but minor profit booking on Thursday and Friday erased some of its earlier gains.  Nifty Friday closed at 8638 and it is likely to test 8715 in the near term.  Optimism about passing GST Bill and expectation of moderate rate cut by RBI on 9th August supported the markets.  On Friday after trading hour’s heavy weight stocks like ICICI BANK and L&T came out with Q1 results, which were below street expectation, can cause increased volatility in the market.

If Rajya Sabha members unanimously support the GST bill, then Nifty can jump towards 9000 mark. If the GST Bill is postponed to the next parliament session then it can cause some profit booking too. So it is advisable to keep long positions with appropriate Nifty put options to reduce the volatility.   Foreign investors are net buyers since last couple of months, and they are accumulating Nifty put options also to reduce portfolio volatility.

Companies which are manufacturing paints, aviation stocks, Oil Marketing Companies and plastic furniture manufacturing companies are likely to move up in the days to come, because of weak crude oil price.  Crude oil lost its key support and it may test $37 per barrel, due to higher inventory.  Sugar stocks and Tea stocks are in good demand.  Domestic Brokerages stocks were in good demand due to higher participation from retail investors and strong equity markets which is driven by high liquidity. 

On the macro data side US initial Jobless Claim, Nonfarm pay roll, unemployment rate and Balance of trade are expected next week.  These data’s will give further direction to US markets. In the domestic side Nikkei Manufacturing PMI and Service PMI are also will be announced next week.

Banking Nifty is slightly over bought, but still having upward momentum and it can test 18699.  If Nifty breaches the 8715 mark then Banking Nifty will move towards 18800 levels. Banking Nifty has supports at 18782 and 18632.

During the week Bank of Japan kept the interest rate unchanged.  Bank of Japan also decided to buy 6 trillion yen worth ETF annually, up from 3.3 trillion Yen a year ago, which will stimulate the Japanese economy. Chinese markets are looking week after China Bank regulator drafts new rules on Wealth Management Products.  Wealth Management Products can only be active in the money market or bond market, not in domestic listed shares.  Many fund managers are reducing their exposure in the domestic stocks.  If the China Bank implements the new regulation then we can expect short term knee jerk reactions in the Emerging markets.

A lot of mid-cap and small-cap companies are coming out with their Q1 earnings which include Nilkamal Plastics, Rushil Decor, Delta Corp, Indigo, VRL Logistics, HEG, Voltas, Wonderla, Torrent Power, Berger Paint, Cadila Health, Disman, HCL-TECH, Pricol, Arvind, Gati, BEL and Sical Logistics.

Investor fraternity  is eagerly awaiting the HCL-TECH Q1 earnings, if the numbers are turned out to be good then we can expect minor pull back on IT Index, because it is already entered in the oversold region.   Major support for BSE IT Index is at 10730 and it will face resistance at 10910.  On Friday we saw marginal uptick in TCS and WIPRO due to oversold situation.

 

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ALEX MATHEWS

ALEX MATHEWS

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