Dalal Street Week Ahead: Nifty Analysis for June Fourth Week

LAST WEEK

NIFTY opened with a huge gap-down on Monday at 15,883 as the global markets were negative due to the US inflation data. The zone around 15,700 provided good support for the index for three days. The markets were consolidating with a bearish bias during these days. The US markets closed in the green after the Fed announced a 75 basis points hike. But the actual reaction always comes the following day. With the US close in green, NIFTY opened with a gap-up but fell heavily on the expiry day. There was an intraday fall of more than 500 points! NIFTY opened with a gap-down on Friday and consolidated to close at 15,294, down by 908 points or 5.6%.

BANK NIFTY opened with a gap-down at 33,720 on Monday and followed the general market. The level 33,120 offered support to the index but was broken on the huge fall on Thursday. The index went below 33,000 but there was an up-move on Friday that took the index to 32,743, closing the week 1,743 points down or 5.1%.

IT moved down by 8.2%.

Foreign Institutional Investors net sold shares worth Rs 24,000 crores last week.

Domestic Institutional Investors net bought shares worth Rs 18,000 crores.

The global markets fell heavily last week with the American and the European markets moving down by nearly 5%. NIKKEI fell by more than 6% along with Hang Seng and Kospi. But it is worth noting that the Chinese markets closed in the green.

The week started with the fear of a rate hike as US inflation came out at 8.6%. The Fed on Wednesday was forced to go for a 75 basis points hike, the largest hike in 18 years. The US markets closed in the green on Wednesday as the market movement will be determined by the long-short ratio on the day of the event. The markets fell heavily the next day. Our markets fell on Thursday morning itself. We have broken the consolidation zone of the previous year. 

Talking about recession, there are increasing worries as the Fed has decided to risk recession for beating inflation by 75 basis points. Rate hike is expected in the next meeting in July also.

India’s CPI inflation data came out at 7.04% in line with the expectations. But it failed to ease the situation. Also, WPI data came out at 15.8% which is higher than April and the economists consider this to be the worst in 30 years though we do not have proper data to compare.

Other major events of the week were:

The European Central Bank Board met on Wednesday to discuss the sell-off.

India’s daily COVID cases crossed 13K for the first time in four months.

Jerome Powell in his speech on Friday reiterated the need to control inflation.

SGX NIFTY is at 15,350.

INDIA VIX is at 22.75.

WEEK AHEAD

NIFTY has supports at 15,250, 15,200, 15,175 and 15,000. We can expect resistances at 15,315, 15,460, 15,580 and 15,630.

BANK NIFTY has supports at 32,500, 32,300 and 32,170. Resistances are at 32,870, 33,000 and 33,200.

NIFTY has the highest call OI build-up at 16,000 followed by 15,700. The highest put OI build-up is at 15,000.

BANK NIFTY has the highest call OI build-up at 34,000 and the largest put OI build-up is at 32,000. 

It is after a long time that NIFTY is below 15,300. It is 52 week low for the index. Hope you remember the consolidation zone of 2021 from where the index broke out to cross 16,000. It will be hard for NIFTY to come back above 16,000 with the negative sentiments around, due to the fear of recession. 

Though the economic data to be released by the US this week are not that important, let us watch if there is any positive cue. Powell will testify before the US Congress on Wednesday and Thursday. I will be listening to the speeches of other Fed officials as well. Also, Christine Lagarde, the President of ECB, will speak on Monday. They are set to hike the rate in July.

Note that the US markets will remain closed on Monday on account of Juneteenth day. Follow the European markets for trading.

Make sure that you do not fall into the trap of pull-back. Bear market always gives sharp pull-backs followed by another round of fall. 

I will be closely watching the psychological level of 15,000 this week.

Let us know your expectations for the week in the comments section!