Market Pulse:
Uptrend Under Pressure
Highlights:
Two up and three down days
Weekly Market Review:
In a highly eventful week, the benchmark indices advanced 0.6-0.7%, extending their winning streak to three weeks.
Frontline indices began the week on the back foot, after a positive opening at the bourses was turned upside down in the first two sessions.
The broader market indices became victims of massive selling pressure on Monday and Tuesday.
Wednesday’s session brought a ray of hope for market bulls, as major indices held onto their strong gains despite a rate hike by the Reserve Bank of India.
Against the backdrop of rising crude oil prices and growing inflation concerns, the RBI increased key interest rate by 25 basis points to 6.25%. This marked the first rate hike under the NDA government.
While the RBI interest rate hike took many analysts by surprise, the bank’s neutral stance certainly emerged as a positive.
The relief rally continued on Thursday, mainly driven by RBI’s neutral stance and strong global market sentiment.
Friday’s range-bound session ended on a flat note, as a late surge in major composites helped them recover most of the intra-day losses.
Broader market indices managed to recover toward the end of the week. Eventually, Nifty Midcap advanced 1% while Nifty Smallcap declined 0.6%.
On the sectoral front, Nifty Pharma (+4.8%), Energy (+2.7%), and Metal (+2.5%) displayed strength, while Bank (-0.9%) and Financial Services (-0.5%) slipped lower.
MarketSmith India’s IND 47 index, our proprietary list of top 47 stocks in chart and fundamental characteristics, closed 1.5% lower for the week, mainly due to the sell-off in smallcap stocks.
On the economic front, India’s services sector slowed down in May, going by Services PMI reading of 49.6. A figure below 50 indicates contraction and the reading has fallen below 50 for the first time in three months.
Persistent foreign institutional selling against the backdrop of rising bond yields, depreciating rupee and increasing crude oil prices have weighed on the Indian market in the recent times. However, during the week, FII selling pressure eased a bit.
While Nifty managed to break above its near-term resistance level of 10,800 on Thursday, the index could not garner strength to close above it.
During the week, two distribution days fell off the count from Nifty. On the Sensex, one distribution day was added and the index got rid of one due to age. The distribution day count now stands at two on the Nifty and three on the Sensex.
The market condition remains unchanged at Uptrend Under Pressure for now. For the market to move to a Confirmed Uptrend, the Nifty needs to reclaim its previous high of 10,929.20. We see strong support for the Nifty near the 10,400 level. On the upside, the index is facing stiff resistance around 10,800-10,900 levels.
In the coming week, the following events could serve as market movers:
– Industrial production and manufacturing output data: June 12, 2018
– CPI Inflation data for May: June 12, 2018
– Fed Interest rate decision: June 13, 2018
– WPI Inflation data for May: June 14, 2018
Current Outlook:
– Be cautious with any new purchases.
– Form a defensive game plan for your portfolio.
– Stay disciplined and exercise sound sell rules.
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