With the Nifty recovering around 9 per cent in the last one month, has the Indian market outperformed the bears?

Indian equity benchmarks staged a strong rally for the week ended July 29 and closed at their highest level since April 22, 2022. For the week, the Sensex jumped 2.67 per cent or 1,498 points at 57,570 and the Nifty 50 index climbed 2.62 per cent. Or 439 points closed at 17,158.

The Nifty rose nearly 9 per cent and the Sensex 8.6 per cent in the month of July, which was the best month of the current year.

Is the bear phase over for the Indian stock market?

The sharp jump in July was due to a combination of reasons. Analysts said better quarterly earnings, FII buying and expectations of the US Fed to rein in aggressive rate hikes boosted investor sentiment.

There has been a respite from continued selling by foreign investors as they have become net buyers with nearly Rs 1,100 crore inflows in the Indian equity market so far this month.

This comes after a net withdrawal of Rs 50,145 crore from equity in June. This was the highest net outflow since March 2020, when they pulled out Rs 61,973 crore from equities, data from the depository showed.

National Stock Exchange data shows that on Friday, FIIs bought shares worth Rs 1,046 crore after buying shares worth Rs 1,600 crore.

“Pessimism was high and markets were oversold, corporate earnings have been good, Fed rate hikes and bond yields were discounting that inflation could peak and globally we were seeing there was a lot of negativity that would convert This was because domestic institutional investors were buying and Sanjeev Bhasin of IIFL Securities told Outlook Business, “We got some good data on the FII front as they became buyers and closed the sale.”

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The bulls have created a lot of ruckus especially in the last one week. Sumeet Bagadia, executive director, Choice Broking, says the US Fed hiked policy rates by 75 basis points, which was on expected lines and largely influenced by the market.

During the week, metal stocks witnessed strong buying as Nifty Metal rose 7.69 per cent, while Media and Nifty Services index saw a gain of 3 to 5 per cent. Overall, all sectors are capitalizing on their gains.

Bajaj Finserv was the top Nifty gainer, with the stock climbing 18 per cent to Rs 1,309 crore after its profit jumped 57 per cent, on healthy earnings by its subsidiaries in the first quarter ended June 30.

The company had made a net profit of Rs 833 crore in the same period a year ago.

Bagadiya points out that Nifty has formed a bullish candle on the weekly chart which suggests an upward rally for the upcoming session as Nifty closed above its 200-day moving average.

“Nifty has finally closed above the 200-DMA which is the level of 17,025 which suggests a northward journey. From the open interest data, the highest level was seen on the call side at 17,500 level, while on the put side it was at 16,900 level followed by 16,800 level. Momentum Indicators Moving Average Convergence Divergence (MACD) and Stochastic were trading with a positive crossover on the daily time frame which suggests strength in the counter,” says Bagdia.

He added that the short-term support for Nifty has shifted to around 17,000 levels, while the uptrend 17,450-17,500 could act as an immediate hurdle.

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We’ll have to see more data and how global flows spread. I am pretty sure that if the dollar weakens, you can see emerging markets outperforming, says Bhasin.

Nifty may face resistance around 17,400-17,500 as Nifty has turned bullish, but we may see an outperformance in IT metal stocks and IT metal stocks, says Bhasin.

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