Nifty chart indicates buying at lower levels; earnings to drive market momentum this week

On the domestic front, better than expected monsoon and Brent crude falling to a nearly 4-month low at below $100, will be positive for the market sentiment.

Nifty chart indicates buying at lower levels; earnings to drive market momentum this week
Nifty has formed a Bullish Hammer candle on daily scale indicating buying at lower levels. (Image: REUTERS)

By Rahul Shah

Markets took a breather last week but, the overall structure looks positive. In the coming sessions, earnings will drive the markets. Equity benchmark Indices clocked their first weekly loss in four weeks as investors fretted over likely aggressive tightening by central banks in the wake of recent inflation numbers. Benchmarks Sensex dropped 721 points or 1.32 per cent to close at 53761 and Nifty shed 176 points or 1.08 per cent to close at 16049. Asia, stocks hit a two-year low and were heading for a weekly loss, while the dollar was set for its third week of gains to above 108 as a fresh slew of rate hikes around the world deepened concerns about the outlook for global economic growth.

US S&P 500 slipped nearly 1% after June Inflation spiked to 9.1%, much ahead of street expectation at 8.8%. China’s Q2 GDP grow 0.4% (YoY while the expectation of 1.2% which has a negative impact on the global markets. The Indian rupee was steady near 80 a dollar on Friday, after hitting a fresh all-time low of 79.99 in the previous session on continued foreign fund outflows from stock market and a stronger greenback. Foreign investors have been dumping domestic assets with year-to-date net sales have exceeded $30 billion so far this year.

Markets may bounce back next week on account of positive domestic and global cues. On the domestic front, better than expected monsoon and Brent crude falling to a nearly 4-month low at below $100, will be positive for the market sentiment. Moreover, India’s VIX declined over 2% to close at a 2-month low, which will boost the market sentiment. India’s June CPI and WPI reported in line with expectation at 7.01% and hope of cool down inflation due to fall in oil price and hope of a good monsoon. FIIs selling pressure gradually reduced and last week FIIs were net sellers of Rs 1100 crore. HDFC Bank reported a decent set of numbers which will strengthen the sentiment of overall banking universe, we remain positive view on the sector with strong earnings visibility in the sector.

Among the global markets, easing consumer inflation expectations improved sentiment and Federal Reserve officials tamped down market concerns of more aggressive interest-rate hikes will be positive for the sentiment of the market.  While a flurry of data was released Friday, traders paid close attention to the decline in US consumer long-term inflation expectations, which dropped to a one-year low. This is good news for the Fed as it seeks to prevent inflation from becoming entrenched in the economy. Traders had jumped to price in greater odds of a one-percentage-point rate hike in July after inflation data came in hotter than expected on Wednesday. But they scaled back those bets following comments from Fed official to hike 75bps interest rate. Expects US inflation nearly peak due to fall in energy and commodity price. Coffee, cotton, palm oil, crude oil, copper, aluminum price fell to 3-15 months low.

Nifty has formed a Bullish Hammer candle on daily scale indicating buying at lower levels. It has negated the formation of lower lows on daily scale and now a negate of lower highs could end the recent decline to again drive a move towards higher levels. Now it has to hold above 16061, to witness an up move towards 16161 and 16250 zones while on the downside support exists at 15950 and 15888 levels.

Sun Pharma: BUY
Target: Rs 925 | Stop loss: Rs 860

Sun Pharma has given range breakout on daily chart and holding well above the same. Buying is visible across Pharma space with noticeable volumes and small follow up can take it towards high territory. It has formed bullish candle on daily scale and supports are gradually shifting higher. RSI oscillator is positively placed on daily and weekly charts indicating positive move ahead. Considering the current chart structure, we advise traders to buy the stock for an up move towards 925 with a stop loss of 860

Dalmia Bharat: BUY
Target: Rs 1550 | Stop loss: Rs 1415

Dalmia Bharat has given Pole and Flag breakout on daily chart and managed to close above the same. It is forming higher highs- higher lows from past three weeks and holding well above its crucial 50 DEMA. It has formed bullish candle on daily scale and supports are gradually shifting higher. RSI oscillator is positively placed on daily and weekly charts indicating positive move ahead.  Considering the current chart structure, we advise traders to buy the stock for an up move towards 1550 with a stop loss of 1415.

(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. The views expressed are the author’s own. Please consult your financial advisor before investing)

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