Markets looking for a trend

The week gone by behaved on expected lines and made marginal gains. It could be called a week where markets tried to find their levels but were unable to do so. At the end of five days, gains were notched on Monday, there were losses on two days and the remaining two days were flat.

BSESENSEX gained 179.95 points or 0.34 per cent to close at 52,907.93 points while NIFTY gained 52.80 points or 0.34 per cent to close at 15,752.05 points. The broader indices saw BSE100, BSE200 and BSE500 gain 0.32 per cent, 0049 per cent and 0.55 per cent respectively. BSEMIDCAP was up 0.26 per cent while BSE SMALLCAP gained 1.17 per cent.

The Indian Rupee lost 70 paise or 0.89 per cent to close at Rs 79.04 to the US Dollar. Dow Jones gained on two of the five trading days and lost on the remaining three. It closed with losses of 403.42 points or 1.28 per cent at 31,097.26 paise.

The week's trading saw an interesting event happening. While the gap which was talked about was entered into, but failed to be filled. Having done so, it just gave way. The high of the week was made on Monday itself at 53,509 on BSESENSEX and at 15,927 on NIFTY. This indicates that markets exhausted all their momentum in just one day. Not only the highs were not attempted again, but markets remained range bound with only intraday volatility.

There was plenty of economic activity. The government increased the import duty on gold from 7.5 per cent to 12.5 per cent. It also levied a windfall profit tax on exploration companies. This is a tax which is being levied in a number of countries as a result of the sharp increase in crude prices. At the same time, it also levied an export duty of Rs 13 per litre on Diesel and Rs 6 per litre on Petrol and ATF. This would reduce the effective realisation made by refiners who find it easier to export than sell in the local market.

GST numbers for June 2022 were very encouraging at Rs 1.44 lakh crore. This gives confidence that the number of 1.4 lakh crore could be taken as a base for the future collections and the gross GST collection could be in the range of Rs 16.5-17 lakh annually.

FPI sales seem to continue unabated. In the month of June 22, they have sold Rs 58,112 crs making the total in the first half of calendar year 2022 a total of Rs 2.2 lakh crore. This becomes one of the highest sales by FPI in a month and the highest half yearly as well.

Coming to the market's performance on Friday, it is quite interesting. The day was propped up by ITC which rose Rs 10.90 or 3.98 per cent. For the week, ITC was up Rs 18.55 or 6.98 per cent. Heavyweight Reliance lost Rs 185 or 7.13 per cent on Friday. For the week, Reliance lost Rs 92 or 3.68 per cent. Along with Reliance, another oil explorer ONGC and OIL India were also sharply down on Friday.

June futures expiry on 30th June was a quiet affair. The series closed with losses of 389.90 points or 2.41 per cent at 15,780.25 points. The series had begun at 16,170.15 points.

Results would begin in the week ahead and the market would keenly watch the impact of commodity prices and how companies have coped with the same. It would be interesting to see how the favourable impact of the depreciation in the rupee has helped the IT sector.

The week ahead would be crucial for the markets as we need to decide which way they are headed. While broadly speaking we would continue to be range bound, and trading in a range, we need to decide the trend. As readers would recall the immediate resistances would be at 15,900-15,950 levels, all the way to 16,100 points. On the BSESENSEX these levels would correspond to 53,750-53,950 points.

This would be followed by the downward gap made on 13th June at the level of 15,886 points to 16,172 points. The gap on BSESENSEX is at 53207 to 54,205 levels. It is important that for there to be a breakout and upward momentum to set in, the gap needs to be filled and also sustained. On support we have them at 52,650-52,750 on BSESENSEX. The final support would be at 51,000 levels. On NIFTY the support would be at 15,350-15,425 points followed by 15,150-15,200 as the final support.

The strategy for the week ahead would be to avoid overnight exposure as markets have a nasty habit of opening with gaps in either direction. The gap is not the worry as after the opening, markets have become range bound for the remaining part of the day, making trading difficult. Use rallies to sell and sharp dips to buy in only large cap stocks. Allow markets to decide a trend or at least attempt making a trend.

Trade cautiously.