Indices opened flat on Tuesday and weakness in the markets dragged indices lower by a percentage point with the trough coinciding with the 12 pm level, a rally which began post two again moved the markets into flat territory.
IT continues to lag the overall markets with news of dwindling order books and lower-than-expected results adding significant pressure on the industry. Margins of Indian IT companies are under pressure due to reasons like global economic turbulence, there may be a marginal decline in hiring because of increased automation. Banks continue to outperform in trade with SBI and ICICI bank both closing the session 1 per cent higher.
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The first signs of how the UK’s economy is faring post-Brexit vote are emerging, starting with inflation data on Tuesday, this will be the week when a raft of economic data indicate how the UK’s economy fared in July, the first month after it voted for Brexit. On Wednesday, we will find out unemployment data for July, followed by retail sales on Thursday and public finance data on Friday. What happens in this region could have considerable impact on domestic export companies.
We continue to see considerable call buildup around the 8,700 levels, this suggests that smart money may not be betting on a big rally to take the markets much higher above 8,700 in the near future. PCR ratio is around the 0.98 levels which could also mean overall retail outlook is still positive and most retail participant expect the markets to move up from this juncture.
Technically the markets remain in an overall uptrend, over the shorter term markets have made a head and shoulder pattern on daily charts over the last fortnight, this suggests that a close below 8570 could take the indices lower in the near term, candle charts portray significant resistance at the 8700 level and fresh longs should not be initiated below this level.
(The author is co-founder and director, Zerodha)