Nifty has to stay above 7,930 for the gains to continue
We had mentioned in last week’s closing report that Nifty, Sensex are likely to move sideways and that the market lacked momentum. We had also mentioned that Nifty can decline, if it closes below 7,750. The indices moved sideways for most of week, as the markets were in a wait and watch mood for the US Federal Reserve to take its decision on interest rates. On Thursday, Ganesh Chathurthi (a holiday for Indian stock markets), US Federal Reserve decided to leave the interest rates unchanged and the fear of foreign institutional investors withdrawing partially from the Indian stock market was controlled. Immediately, on Friday, there was a rally in the Indian stock markets.
The summary of movements of indices over the week, Monday through Friday are given in the table below:
On Monday, the major indices in the Indian stock market were initially range-bound, but closed the day with gains. Hopes of a rate cut by the apex bank on the back of strong macro-economic data buoyed the Indian equities markets on Monday. The better-than-expected wholesale price index (WPI) and a modest factory output data cheered investors. The hopes of a healthy consumer price index (CPI) data, expected to be released later in the day, further supported the markets. Analysts cited healthy WPI data released on Monday and Friday's index of industrial production numbers (IIP) to be the positive triggers for the markets.
On Tuesday, market analysts felt that despite strong macro-economic data, investors remained cautious ahead of the upcoming decision on the US rate hike. Even the better-than-expected inflation and modest factory output data, which had cheered investors with hopes of a rate cut by the Reserve Bank of India, did not support buying in the markets.
On Wednesday, the major indices in the Indian stock markets made a small gain. High interest rates in the US were expected to wean away foreign portfolio investors (FPIs) from India. It was also expected to dent business margins as access to capital from the US would become expensive. Foreign funds had already sold around $3 billion, mostly in Indian equities since August 2015. Analysts however, said a hike in US interest rates would show that the US Fed is confident of the US economy's ability to start generating growth and employment. This was expected to be beneficial for Indian exports to US.
On Thursday, a holiday for Indian stock markets, the US Federal Reserve decided to leave interest rates unchanged and it was a booster to emerging markets all over the world, which have been eager to bring in funds from foreign institutional investors.
On Friday, the markets rallied and the major indices closed with gains of around 1% over Wednesday’s closing values. However, the important indicator is that the market came off sharply from the day’s high. European markets had fallen sharply and US futures were trading sharply lower.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: