MUMBAI: Benchmark indices might open gap-up Monday following a strong closing for the Dow Jones, which gained over 2% after positive comments by the Fed’s James Bullard on the US economy. Thereafter the trend for the week will play out based on the quarterly numbers.
HDFC Bank reported a mixed set of numbers with double-digit credit growth in Q1 FY23, but a rise in bad loans sequentially. The weekly range for the Nifty is 15858-16275. The rally could extend through 16600 if the resistance is breached.
“The market would respect the 15858 level which was the recent low while initial resistance could kick in at the July 8 high of 16275,” said Rohit Srivastava, founder, IndiaCharts, who expects positive momentum led by short covering.
On Friday, the market bounced back from the earlier session’s low of 15858 to close at 16049.
FIIs continue to be net sellers in the cash market and have built huge bearish positions on index derivatives like Nifty and Bank Nifty futures contracts. Any potential rally would hinge on FIIs squaring off or covering these bearish bets by buying them back. This buying, called short covering, could boost the indices.
Their sales have been driven by the Fed raising its benchmark Fed Funds Rate which has catapulted the dollar index to an over two-decade high and resulted in the euro being at parity with the dollar. The stronger dollar has pulled down the rupee, which results in FII's dollar gains reducing, which, in turn, drives up the share sales in EMs like India.
“Markets will continue to react to global macro factors like inflation, interest rate measures, currency and commodity movement. With the start of April -June 2022 quarter result season, we can expect stock and sector-specific action over the next one month,” said Shrikant Chouhan, head of equity research at Kotak Securities.