NEW DELHI: Indian equity markets, which have been driven by strong FII inflows and good quarterly numbers, could see consolidation this week in absence of any major triggers. The result season is over, and the foreign investors may take a breather in the coming few days. This means equity markets may remain volatile within a narrow range.
FIIs have been generous in August as they infused $5.6 billion in the first three weeks of the month after having pulled out USD 28 billion in the first six months of 2022. This was reflected in over 6 per cent jump in benchmark indices Nifty and Sensex over the past one month. While the Nifty came close to hitting the 18,000 mark, the Sensex breached the 60,000 level for the first time since the month of April.
However, analysts feel that FII buying may taper off in August going forward. “The consistent FII buying seen in August is likely to lose steam impacting sentiments. The elevated valuations do not justify further run-up in markets,” says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The sentiments, however, may remain positive as the festive season is around the corner, and most macroeconomic factors are slowly turning positive or less negative. “The earnings season is over but the festive season is about to begin which is expected to be normal after two years. This should augur well for consumption-oriented sectors and should keep the overall momentum positive in the market,” says Siddhartha Khemka, who is the Head of Retail Research at Motilal Oswal Financial Services Ltd.
The earnings season ended with strong revenue growth. In the first quarter of the current financial year, the revenue of NSE 500 companies increased by 37 per cent Y-o-Y, while EBITDA and PAT grew by 18 per cent and 21 per cent, respectively. However, technical analysts see bearish formations in the charts with the Nifty breaking the support level of 17,850.
“Below 17900, the correction formation is likely to continue and could retest the level of 17600-17500. On the flip side, 17900 – 17950 would act as an immediate hurdle for the bulls. Fresh uptrend is possible only if the index clears the resistance of 17950, which could then take it further to 18050-18150 levels,” says Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities Limited.