After ending last week with a surge of 0.75% following green endings seen on the last 4 days, Nifty remains locked within a narrow range of 23,200-23,500. If it breaks out above 23,600, the index can rally as much as 24,000 depending on news flow around the upcoming Union Budget and 100-day plans by various ministries.
However, recent movements in Nifty suggest a time-based correction. “A near-term consolidation seems probable as domestic investors await cues from the upcoming union budget. There is a growing opinion that the government could place emphasis on welfare, giving a fillip to consumption-led stocks,” said Vinod Nair, Head of Research, Geojit Financial Services.
This week will be a holiday-shortened one as the market will be shut for trading on Monday due to Eid celebrations.
Here are the key factors that are likely to seal the fate of Nifty bulls this week:
The Dow Jones ended the week 0.65% lower, the FTSE ended with a loss of over 1%, the Hang Seng 2.3%, and Japan’s Nikkei closed with a weekly gain of 0.44%.
The UK economy showed no growth as the April GDP came flat as compared to the rise of 0.4% in March.
US May CPI inflation came flat as compared to a 0.3% rise in April, indicating a decline in the prices of essential commodities. The Federal Reserve kept its key interest rate unchanged in the FOMC meeting and scaled back its forecast from three rate cuts to just one this year after an inflation pickup in early 2024.
2) Macro cues
The market will also be tracking the release of industrial production data from India, China, and Eurozone inflation. The Bank of England will also announce its rate decision on June 20.
3) FII flow
Since the panic selling on June 4, when election results were below Street expectations, FII selling has reduced on Dalal Street. NSDL data shows the net sell figure at Rs 3,063 crore through 14th June.”The resilience of the market and eagerness of retail investors to buy every dip in the market will force FPIs to reduce their selling which was sustained in May. However, if the market continues to rally from here, FPIs may again turn sellers in India and buyers in other markets like Hong Kong which are very cheap compared to India,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
4) Technicals
Analysts expect the 22,800-23,100 zone to provide support in case of profit-taking, and a decisive close above 23,600 could drive the index to a new milestone of 24,000. “In addition to key sectors, we recommend focusing on themes such as agriculture, chemicals, cement, and select defense stocks, which are attracting significant interest for long trades. However, traders should exercise caution and select midcap and smallcap stocks wisely despite the current buoyancy,” said Ajit Mishra of Religare Broking.
5) Announcements by the new government
Market participants would be keenly tracking the release of the 100-day plan of various ministries. Last week, the defence ministry’s announcement of increasing military exports to Rs 50,000 crore sparked a rally in defence stocks.
