Sensex, Nifty up 9% in one month. Will the upward trend continue in August?
For the past few days, the S&P BSE Sensex and Nifty 50 have been a good performer for the market with gains of over 9 per cent in the last one month. The gains in mid- and small-caps have been sharp, with both these indices rising around 12 per cent and 10 per cent during this period.
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But, will the rally seen in the past month continue, or is it a short-term bounce that will eventually sell out?
Analysts said the 9 per cent gain in the Frontline index in the past one month is in line with the 9 per cent gain in the S&P 500 index. He believes the decline in the US and other developed markets was led by strong job numbers and the resilience of the US economy, raising hopes that the US may be able to avoid a recession; Or if there is a recession, it will be mild.
According to Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the big positive for the Indian market amid the current move is that foreign portfolio investors (FPIs) became net buyers in July after nine months of relentless selling.
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“A sharp fall in the dollar index above 109 below 106 indicates that the flight for the safety of the dollar is over. After the uptick, now capital goods, auto – especially the passenger vehicle and commercial vehicle segment – and select pharmaceuticals look interesting. High-quality financials will remain resilient,” Vijayakumar said.
Also sentiment is back home with crude oil prices falling 7 per cent in the past one week – from around $110 a barrel for Brent to around $102 a barrel now. This, analysts said, will help contain inflation, which is operating above the Reserve Bank of India’s (RBI) comfort zone.
According to G Chokkalingam, Founder and Chief Investment Officer, Equinomics Research, any possible fall in oil prices to less than $100 a barrel could largely take care of global inflation problems, leading to a further correction in global equities. . He said that India would be a huge beneficiary of any possible mild slowdown across the world as oil prices could fall sharply in such a possible scenario.
“US Fed balance-sheet reduction plans and oil prices will continue to be key risk factors in the short term. We believe that the domestic market may rise further for a few weeks amid volatility and intermittent correction,” says Chokkalingam.
Technical chartists, too, see some further upside for the markets from current levels with the Nifty 50 index crossing the 17,000 mark last week. However, there may be some panic ahead of the outcome of RBI’s monetary policy meeting on Friday, August 5.
“This level coincides with the 200-Simple Moving Average (SMA) and should therefore be considered a significant development from a technical point of view. We may see some strength ahead, but the market movement will remain strong. For the current week, After 17380, 17450 are immediate levels to watch with respect to Nifty 50 index,” said Sameet Chavan, Chief Analyst-Technical & Derivatives, Angel One.
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