Market Next


August 21
19:12 2016

Last week Nifty remained in a tight range due to lower participation from investors due to long week end. Nifty is facing resistances at 8700 and 8727 levels; if these two levels have been taken off then we can expect the Nifty to test 8883.  Nifty has strong support at 8600 and 8529 levels.  Foreign Portfolio Investors pumped nearly 37600 crore rupees in the financial market on a year to day basis.  Next week we can expect consolidation of Nifty and minor short covering can also be expected. Substantial supports also were there from Domestic Institutional Investors, they purchased equities worth 7900 crore for the last one year.

 The Central Government staff will get their salary arrears along with August salary.  Government made provision up to 34600 crores for the same.  If the part of the said amount goes to the Mutual Funds or in IPO market or in the secondary market then this inflows can prop up the Nifty further towards 9000 levels.  Global equity rally is purely liquidity driven. The biggest risk, if the US Fed resumes the rate hike cycle.  If this happens then we can expect withdrawals from the emerging markets. But chances are very remote despite the latest initial claims for state unemployment benefit dropped by around 4000.  Currently the claims are below the threshold at 300000. 

As expected Banking Nifty closed higher at 19414, the proposed SBI with its 5 associate Banks merger acted as a positive trigger in the last week.  The market out- look for banking Nifty is positive despite it is in the verge of testing over bought territories.  Banking Nifty has support at 18928 and 18829.  Banking Nifty has resistances at 19564 and 19797.  If Nifty manages to breach the first resistance at 8727, then banking Nifty also will move above 19564. 

WPI inflation number which came out in the last week accelerated to 3.55% in July from 1.62% in June 2016.  Inflation based on CPI accelerated to 6.07% in July from 5.77% in June 2016.  CPI Inflation also moved up sharply to 4.52% in July from 4.39% in June 2016.  This was the key reason why markets were trading in the red last week.

Banking, Cement, Auto Mobiles and selected pharma stocks may gain next week.  IT and large cap pharma stocks may remain subdued next week.  Ahead of August expiry we can expect triggering of stop losses at around 8700 on Nifty.  In the stock segment short covering is expected in banking sector, especially in PSU Banking sector.  Nifty PSU Banking Index is likely to test 3258 in the short term.

Companies like Hind Copper, Hind Petro, NTPC, GILLETTE, Tata Power and Jyothi Structures are expected to announce their earnings next week.  On the macro-front US Manufacturing PMI, Continuing Jobless Claims and GDP rate will come out next week.  From Euro zone Industrial production, unemployment rate, GDP growth rate and Retail Sale numbers also expected.


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