By VK Sharma
The markets were in a consolidation mode last fortnight, following the Nifty touching a high of 25,116 points on May 15. The markets have weathered the sharp change in the mood of Trump — from that of a close ally to someone who does not know how to respond to the emergence of India as a military power in Asia.
Imitation, they say, is the best form of flattery. So, Washington wanting to now build a golden dome of air defence (on the lines of India’s Aakash Teer system) is a silent but grudging admission that the US needs to play a catch up. Western defence journals have spoken eloquently about India’s cost-effective systems. Subsequent revelations that the Chinese and Turkish personnel had helped Pakistan man their key arms only show India in a better light.
Technically speaking, the markets have so far traded in the shadow of the long green candle formed on the weekly charts for the week ended May 16. In the adjoining daily candlestick chart, one can see the high was made on May 15 and the low on May 12. Joining the high of 25,116 and a subsequent lower high of May 26, the trendline number 66 has been drawn, which will now act as a resistance.
Trendline number 63, drawn by joining the low of 24,378 formed on May 12 and 24,737 registered on May 22, will act as a support. These two are likely to converge and the Nifty could break in either direction.
While the Nifty has edged lower by 0.41% last week to 24,750, the BSE Smallcap index has risen 1.36%. The Bank Nifty gained 0.63%.
While the Nifty is still down 5.81% from the all-time high of 26,277 seen on September 27, 2024, the Bank Nifty is higher by 2.3% from the all-time high seen on September 26, 2024. Friday’s close of 55,749 is the highest-ever closing for the Bank Nifty till date. This move of the Bank Nifty has the power to push the Nifty higher.
The monetary policy committee (MPC) of the Reserve Bank of India gets into a three-day huddle from June 4. The markets expect the MPC to cut the repo rate by a quarter percentage.
The FY25 GDP growth rate of 6.5% shows that India continues to outperform many of the world’s larger economies. Next year, the growth could be between 6.3% and 6.8%.
While an early onset of the monsoon brings its own problems, the forecast for a 106% precipitation of the long-term average augurs well. Expect banking to do well, while defence stocks could take a short breather after an impressive rally. Work with stop losses on your trading portfolio.
The author is a market veteran. He retired from HDFC Securities asthe head of PCG and capital market strategy.