Weekly Market Wrap: Nifty touches all-time high on all 5 days, positive outlook ahead

The equity markets have been witnessing a high gear of trajectory for the third week on the trot as the Nifty and Sensex touched fresh all-time highs on all five days of the past week. The benchmarks have gone up on global factors such as China's economic stimulus and US Federal Reserve's call on rates. The Nifty closed above the crucial mark of 26,000; the Sensex is inching close to the 86,000 levels. However, broader market indices underperformed due to the BSE Midcap that gained only 0.7 per cent; it was flat for the Smallcap index.

Global Impact: China's economic stimulus

Indeed, the PBOC's reduction last week of the reserve requirement ratio (RRR) by 50 basis points into one of the most significant stimulus measures is said to fuel domestic consumption and investment. This helped pop up Chinese and Hong Kong markets, which have rolled over commodity prices across the globe. In the backdrop of such a euphoric metal market, Nifty Metal index have surged by 7 per cent.

“A key highlight from last week was China's economic activity, where the People's Bank of China (PBOC) announced interest rate cuts and a reduction in the reserve requirement ratio, along with fiscal stimulus measures. This sparked a significant rally in both the Chinese and Hong Kong markets, which in turn led to a surge in commodity prices,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Another factor that aided in the correction was crude oil prices by 4 per cent as Saudi Arabia declared it would concentrate on grabbing a larger market share rather than keeping prices up. This also eased inflationary concerns and lifted investor sentiment.

Domestic Factors: Auto and metal sectors lead

Strong buying interest was seen in the Indian markets, which had focused on the auto, metal, and oil and gas sectors. Two of the top performing indices have been Nifty Auto and Nifty Metal. Sectoral rotation has been a steady force and, more importantly, the abundance of liquidity in the system has caused investors to shift from over-valued segments to those more attractively valued ones.

“Domestically, liquidity remains robust, with signs of sectoral rotation from overvalued segments to areas with more attractive valuations. Movements in commodity prices, the U.S. dollar index, and key macroeconomic data from the U.S. will also be pivotal in shaping the market’s direction. Additionally, geopolitical developments will continue to be a key factor on the global stage,” Meena said.

“On the domestic front, upcoming monthly auto sales data and quarterly updates from companies could drive stock-specific movements in the near term,” he added.

Corporate earnings updates and monthly auto sales data are likely to move the market on a stock-specific basis in the near term. FIIs have been net buyers, with the highest inflows for 2023 so far. Given that Chinese valuations seem to be lower than Indian ones, the flow of FII money toward Chinese markets may have just begun.

Important corporate announcements

Several corporate announcements hogged the headlines last week. Prataap Snacks suffered acquisition of its significant stake by Authum Investment & Infrastructure Limited and Mahi Madhusudan Kela that titled for an open offer. The Tata Steel commission a new blast furnace in its Kalinganagar facility. Ramco Cements has expanded its grinding capacity at Andhra Pradesh and Tamil Nadu plants.

In other news, Adani Total Gas secured $375 million funds for its city gas distribution network, while Mankind Pharma approved a plan to raise up to Rs 10,000 cr via non-converting debentures and commercial papers.

Economic data & global outlook

US economy grows 3 per cent QoQ in Q2, driven by good pace in consumer spending and business investment. Consumer Confidence Index for US dropped to 98.7, lower than expectations. Domestic front witnesses promising and upcoming data sets in form of core sectors, auto sales and GST collections would be very indicative measures for the market participants.

The Nifty looks set to resume its bulls. Looking ahead, it is likely to take the upward journey ahead. Resistance levels in the immediate short term stand at 26,500 and 26,750 while support might be available in the zone of 25,900-25,850. For the Bank Nifty, 55,000 shall be tested. Bottom for it stands at 53,000.