The Dalal Street bulls displayed their dominance throughout the week ending on July 14, propelling the benchmark indices to new record highs. This surge was fueled by positive global cues and rotational buying across various sectors. While the week started off on a relatively flat note, the benchmarks witnessed slight oscillations within a narrow range. However, a strong closing session allowed the indices to end on a positive note. The Nifty and Sensex gained over 1% each, concluding at 19,564.50 and 66,060.90 points, respectively.
Sectoral Highlights: IT, Metal, Realty, and Pharma Lead Gains
The IT sector experienced a sharp surge, emerging as the key highlight among various sectors. Additionally, the metal, realty, and pharma sectors also posted decent gains. However, the underperformance of banking stocks constrained the overall rally. Meanwhile, the midcap and smallcap space continued to witness buying interest, with both indices recording modest gains ranging from 1.25% to 1.85%.
Key Factors Driving the Market Next Week
- Q1 Earnings: The upcoming week will witness an acceleration in the earnings season, making it a significant driver of stock movements. Major announcements include CRISIL, LTI Mindtree, HDFC Bank, Tata Elxsi, IndusInd Bank, ICICI Prudential, Tata Communications, CanFin Homes, HUL, Infosys, and Mphasis.
- Monsoon Progress: The monsoon has intensified, with heavy rains causing disruptions, flash floods, landslides, and casualties in northern India, particularly the mountainous regions. Traders will closely monitor the monsoon’s progress as continued adverse weather conditions can lead to significant economic losses, affecting companies across various sectors.
- Inflation Print: India’s retail inflation exceeded expectations, rising for the first time in five months to 4.81% in June, primarily driven by surging food prices. This upward trend is expected to persist in July, with tomato prices becoming a particular concern. Sustained high prices could push inflation higher, posing challenges for RBI policymakers striving to maintain inflation at the 4% level.
- Public Issues: The primary market is set for another busy week, with two public issues scheduled for bidding and four listings lined up for bourses. Netweb Technologies India’s initial public offering will open on July 17 in the mainboard segment, while Asarfi Hospital’s IPO will commence on the same day in the SME segment.
- FII Inflow: Foreign investors continue to pour money into India, with positive inflows recorded for the fifth consecutive month. In the first fortnight of July alone, equities worth Rs 30,660 crore were net bought by foreign investors. Analysts view this as a significant positive driver for the market’s ongoing rally.
- Oil Prices: Oil prices experienced a decline, driven by a strengthening dollar and profit-booking after a strong rally. However, the market could resume its upward momentum in the upcoming week due to factors such as easing inflation, plans to refill the US strategic reserve, supply cuts, and disruptions.
- Technical View: The performance of the banking and IT sectors will significantly influence the market’s trajectory. A decisive close above 31,600 in the Nifty IT index and sustainability above 44,500 in the Nifty Bank will further fuel the market’s momentum. The Nifty is poised to test 19,750 and potentially reach a new milestone of 20,000. Support levels are expected at 19,100-19,300.
- F&O Cues & India VIX: Option data suggests that the Nifty reaching 20,000 is a possibility in the coming weeks, with near-term resistance expected in the 19,600-19,700 range. Support levels are projected at 19,500-19,300. India VIX, measuring the expected volatility in the Nifty50, has dropped to its lowest level since December 2019, favoring bullish sentiment.
- Global Markets: Positive momentum in global markets has bolstered confidence in the domestic market. Last week, the Dow Jones Industrial Average (DJIA) gained 2.3%, the S&P 500 rose 2.4%, and the Nasdaq surged by 3.3%. The favorable performance of the US market, coupled with a potential breakout above 34,600 in the DJIA, is expected to boost sentiment.
To sum up, the forthcoming week will be influenced by a range of factors, including earnings announcements, monsoon progress, inflation levels, public issues, FII inflows, oil prices, technical outlook, F&O cues, and global market trends. Market participants should remain vigilant and consider stock selection and risk management amidst potential consolidation and evolving market dynamics.
Disclaimer
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