Market Outlook

Week that was?

• Equity benchmarks put up a break on four weeks winning streak amid subdued global cues. Nifty has ended the week at 15683, down 0.7%. Broader market relatively underperformed as Nifty midcap and small cap lost 3% and 2%, respectively. Sectorally, except FMCG, IT all other major indices ended in red weighed by Metal, Pharma, auto and PSE

Technical Outlook

• The Nifty undergone profit booking after clocking a fresh all time high of 15901. The weekly price action formed a high wave candle, indicating breather amid elevated volatility. The major profit booking seen the midcap and small caps
• In the coming expiry week, we expect index to consolidate in the broader range of 15900-15400 amid stock specific action. The ongoing healthy consolidation would help index to cool off the overbought conditions and form a higher base
• The broader structure remain bullish thereby we reiterate our positive stance of Nifty heading towards earmarked target of 16100. However, bouts of volatility from here on cannot be ruled out which would offers incremental buying opportunity in the range of 15300-15500. The target of 16100 is based on following observations:
• a) Price parity of post Budget rally (13597-15432), projected from April low of 14151, at 16055
• b) Past two month's range (15140-14150) breakout target at 16120
• On the sectoral front, It is expected that IT, FMCG to relatively outperform while BFSI, Auto and Capital Goods offer favourable risk-reward setup
• Preferred large caps are Infosys, Reliance Industries, Hindustan Unilever, Ambuja Cement, Bajaj Finance, HDFC Life, Tata Motors while, in midcaps we like Mindtree, Nocil, CSB Bank, Caplin Point, Indo Count Industries, Rallies India, NRB Bearing

In tandem with benchmark, broader market indices underwent profit booking amid overbought conditions. Over past four weeks, Nifty midcap, small cap indices have rallied ~12% pulling weekly stochastic oscillator in overbought territory, indicating extended breather from here on cannot be ruled out
Structurally, it is believed that extended breather from here on would get anchored around 15200. The Nifty has formed a strong higher base at 15200, which we do not expect to be breached

Thereby, traders should take advantage of dips to accumulate quality stocks. The key support of 15200 is based on 61.8% retracement of past four week's rally (14885-15901), at 15274

Important data releases in next week

• US: Crude Oil Inventories, GDP QoQ, Initial Jobless Claims
• EU: Services PMI, Manufacturing PMI
• Japan: Services PMI, Manufacturing PMI
• Results: VST Tillers & Tractors, Info Edge, Bharat Electronics, Sobha Ltd., NMDC, Apollo, Ashok Leyland, Midhani, PNC Infratech

Previous Week Highlights:

• According to ET Auto, the government is considering extending the validity of the FAME-II scheme by two years to 2024. Additionally, the government has raised incentive amount for electric 2-W purchased under the scheme to ₹ 15,000/kWh vs. ₹ 10,000/kWh earlier
• Index of industrial production (IIP) grew sharply by 134.4% YoY on a lower base in April 2021 compared to a growth of 22.4% in March 2021 while manufacturing sector grew by 197.8% YoY
• The RBI has extended the risk-based internal audit (RBIA) system to select HFCs to enhance the quality and effectiveness of their internal audit system. In February this year, the RBI had issued a circular mandating the RBIA framework for select NBFCs and urban co-operative banks by March 31, 2022
• Now, the RBI, through a circular, extended the provisions issued for NBFCs to HFCs also. The provisions will apply to all deposit-taking HFCs, irrespective of their size, as well as non-deposit-taking HFCs with asset size of | 5,000 crore and above
• CPI Inflation rose sharply to 6.30% in May 2021 compared to 4.23% in April 2021. Consumer Food Price Index rose to 5.01% vs. 1.96%, Core inflation rose to 6.32% vs. 5.11%, fuel and light at 11.58% vs. 7.98% and miscellaneous at 7.52% vs. 6.12%
• There was a secular rise in prices of almost all food and non-food items. Within food, oil & fats remain the major contributor as its sequential price rise continues. Within non-food, transport & communication and fuel & light were major contributors due to higher petrol and LPG prices
• Food inflation overall does not seem a major concern as of now while key monitorable would remain global commodity prices particularly oil prices
• According to Business Standard, the Reserve Bank of India (RBI) has proposed to lift the interest rate cap on microfinance institutions (MFIs), and said all micro loans should be regulated by a common set of guidelines irrespective of who gives them

• Figures of direct tax collections for financial year 2021-22, as on June 15, 2021 show net collections were at ₹ 1,85,871 crore vs. ₹ 92,762 crore over the corresponding period of the preceding year, representing an increase of 100.4% over collections of the preceding year
• Advance tax collections for the first quarter of FY22 were at ₹ 28,780 crore against advance tax collections of ₹ 11,714 crore for the corresponding period of the immediately preceding financial year, up ~146%
• According to The Economic Times, petrol and diesel demand for PSU OMCs increased 13% MoM, 12% MoM, respectively, in the first fortnight of June. On a YoY basis, petrol and diesel demand fell 3.5% and 7.5%, respectively, during the same period
• Brent Crude prices was flattish at US$ 72.6 /barrel as compared to previous week's closing price
• Gold prices ended lower at $ 1791/ounce as compared to previous week’s closing price of $ 1867/ounce
• Bond yields ended flattish at 6.01% as compared to previous week's closing price

Source: ICICI Direct