By VK Sharma
Large-caps have taken charge of the markets once again, registering a new high for the Nifty 50 on each of the five sessions last week. On Friday, after opening higher, it closed the day a tad lower at 24,010 points, but managed to register solid gains of 2.17% for the week.
The Nifty is now on a solid footing, courtesy the surge in large-caps. The NSE midcap and smallcap indices, on the other hand, have edged up by 0.56% and 0.45%, respectively. FIIs have returned to the markets, probably having the feeling of missed out earlier. As a result, the long-to-short ratio of FIIs has zoomed to a three-year high of 4.72.
For the moment, the high of 24,174 seen on Friday last is the resistance for the Nifty. Beyond that, 24,367 and 24,610 are possible Fibonacci resistances. In terms of support, one can hope that the previous top of 23,667, achieved on June 21, could now act as a support should the Nifty slip. Previous tops, which initially act as resistance, start acting as a support once they are comfortably crossed.
The progress of the monsoon has been poor compared to the forecast and the long-term average, though it has picked in the last two days of the trading week. But still as of Friday last week, the deficiency was 14%. With around 61% of farmers still dependent on rain-fed agriculture, this is not great news. July is expected to be better.
Meanwhile, the US inflation data for May came in unchanged. Consumer spending rose marginally in May. It gave some semblance of the fact that the Fed’s monetary policy was working, and it may be able to engineer a soft landing for the world’s largest economy.
While the Fed’s guidance is clear on one rate cut this calendar year, the markets are pricing in two as they hope inflation will keep cooling.
Meanwhile, Donald Trump has taken a significant lead after Thursday’s presidential debate with incumbent Joe Biden. The debate ended up highlighting Biden’s physical and mental infirmity. It may not be wrong to say that the debate might have cost Biden the election. While hardcore voters rarely change their voting preferences, debates do make a difference for undecided voters. While it is way too premature to count the chickens as yet, a Republican at the White House augurs well for India.
Corporate results will start pouring in this month, monsoon will shower its blessings and the regular Budget for 2024-25 will be presented during the monsoon session of Parliament. July has been a good month for the markets in the past and this year may not be an exception.
The author is a markets veteran with 35 years of experience. He retired from HDFC Securities as head of PCG and capital market strategy
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