If Nifty reclaims 8400, bulls may push it higher
We had mentioned in last week’s closing report that Nifty, Sensex were to head higher and that Nifty may head towards 8,700 as long it stays above 8,400. During the week’s trading Nifty fell below 8,400 and closed at 8,299.95. The weekly trends of the major indices are given in the table below:
On Monday, a sharp fall in July trade data, the rupee value, and poor monsoon rainfall and diminishing hopes of a rate cut disappointed investors, leading to the major indices falling sharply.
On Tuesday, a lowered growth forecast, the widening monsoon deficit and diminishing hopes of a rate cut, coupled with a massive slide in the Chinese stock markets and its effect on the yuan were the major concerns for investors. The slide in rupee value negated the advantage of lower commodity prices like crude oil. The Indian currency closed at Rs.65.32 to the US dollar.
Other worries for investors stem from the fact that the Reserve Bank of India (RBI) has shown its reluctance to cut interest rates even after current data showed inflation being under control.
Another dampener in Tuesday's trade was global credit ratings agency Moody's decision to lower India's growth forecast for this year by 50 basis points to 7%.
However, sector-wise, healthy buying was observed in information technology (IT), capital goods, consumer durables, automobile and technology, entertainment and media (TECK) stocks on Tuesday.
On Wednesday, according to analysts, recovery in rupee value and the Chinese markets supported the domestic exchanges in the day's trade. Concerns had grown about the Chinese markets, after various efforts by the government, brokerage firms and mutual funds were not able to arrest the fall. Some estimates point out that the continuous slide in the exchanges of the $10-trillion strong economy has wiped off 40%-45% of the entire stock value in the last three months.
The Chinese situation had brightened hopes of a delay in the US rate hike, the decision for which will come in the Federal Open Market Committee (FOMC) meet slated for September 16-17. Higher interest rates in the US are expected to lead the FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
Other concerns such as rupee depreciation were off-set by gains in export-oriented stocks like information technology (IT), pharma and fast moving consumer goods (FMCG). These sectors benefit from the Indian rupee's devaluation and fall in commodity costs.
A continuous slide in the Chinese markets, strain in US stocks and uncertainty over the recommendations on retrospective tax subdued investor sentiments in the Indian equity markets on Thursday.
On Thursday, the markets were also anxious to know the government's position on the recommendations made by the Justice AP Shah committee on minimum alternate tax (MAT). The MAT issue on capital gains tax is expected to impact the margins of foreign funds. This might impact the inflows from the FPIs into Indian stock markets. At the same time, the rupee touched a new two-year low in the intra-day trade at Rs65.69 to a dollar -- the lowest since September 2013. It later closed at Rs65.56. Sector-wise, all 12 indices of the BSE except for fast moving consumer goods (FMCG) and healthcare stocks closed in the red. Sensex was down 1.16% and Nifty 1.44%.
On Friday, the downmove in the stock market continued. Heavy selling pressure was seen in realty, auto, capital goods, banking, power and oil and gas sectors, following a massive decline in the US markets on Thursday and Asian markets on Friday. However, marginal positive buying trend was observed in healthcare sector. Major indices fell by nearly 1%. The reasons for the downmove include weak global market cues, persistent weakness of the rupee and developments in China, from where signs are emanating of a further slowdown and devaluation of the yuan.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were: