Market outlook: Intraday volumes dry up quickly, good consolidation for some consolidation


Domestic stock indices have continued their path to new highs over the past week, but with lower volumes in the derivatives segment. Compared to June of last year, open interest is more or less the same, but volumes in the derivatives segment are down almost 30-40%.

This indicates that intraday volumes have dried up, either due to maximum margin requirements or the lack of confidence of retail participants at current market levels. This is the reason why Nifty50 could not maintain the level of 15,800 after reaching this mark.

Overall, the market stayed in a range with a bullish bias. The May GST collections showed a drop to Rs 102,709 crore. This drop in collections is mainly explained by the large impact on commercial activities due to localized confinements.

Despite the decline, GST collections were still up 65% on an annual basis and continued to be above the psychologically important mark of Rs 1 lakh crore for the eighth consecutive month. Better-than-expected GDP data, positive IIP performance, and GST recoveries above Rs 1 lakh all indicate the economy is showing much needed resilience despite the second wave of Covid-19, further strengthening the general market sentiment.

With various economic data improving, equity mutual funds continued to record net inflows for the third consecutive month in May at Rs 10,083 crore, marking a 14-month high. This is mainly due to the tendency of retail investors to move away from stand-alone investments in favor of funds managed by professionals for their long-term investment needs.

The government in its economic review report said that anticipation of fiscal measures would be essential to boost consumption and investment in the coming quarters. He also said the economic fallout from the second wave of Covid-19 could be limited to the June quarter of fiscal year 21 alone.

In order to revive India Inc’s growth engine and prioritize a sustained upturn in demand-driven growth, the government, with all its firepower, increased investment by 66.5% year-on-year. in April and was successful in mitigating the impact on manufacturing and construction activity from the Covid disruption. With many indicators signaling a solid foundation for economic recovery, the market should support the bull market in the medium term with some short term setbacks.

Event of the week

The world’s largest commodity market was the center of attention during the week. New York Mercantile Exchange traders have chosen call options linked to Brent and WTI crude oil, betting that it will hit $ 100 by December 2022. This comes at a time when oil prices have already risen sharply. by 41% this year in just over a year after the pandemic crushed energy demand, pushing WTI crude prices below zero. It seems that international traders are betting on higher volatility, more than speculation, of oil prices at higher levels. Signs of exuberance are visible in the oil market and hence it would be wise to book profits in oil stocks. Warren Buffett also recently sold much of the US oil giant Chevron Corp.

Technical perspectives

Nifty50 ended the week on a positive note, hitting a new all-time high. The index now appears to be finding the new higher range as the decline to the 15,560 level on Wednesday was quickly absorbed. Nifty has recovered by more than 10% from the low in the recent correction and therefore a slight pullback cannot be ruled out.

AND CONTRIBUTORS

The market is recovering on slowing momentum, as evidenced by the negative divergence of the RSI on the daily chart. Any sustained close below the 15,400 level should be seen as a short term red signal. As long as the benchmark is trading above the 15,400 level, we ask traders to maintain a bullish bias in the market.

Waiting for the week

The coming week could be volatile for Dalal Street over the comment from the US Federal Reserve, which suggested that interest rates should be kept below zero in order to keep the economy liquid. Any development on the same would be eagerly awaited. Right now, the chances of an interest rate hike and a fall look slim, with the 10-year US Treasury yield already sitting near the low end of its recent range.

Meanwhile, with us, the primary market should see an increase in activity with two IPOs expected to hit the market this week. The secondary market will strongly focus on the final process of the government’s offer to privatize some PSUs. Long-term investors are advised to continue investing in reputable names in a phased manner. Nifty50 closed the week at 15,799, up 0.82%.


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