Markets have a mind of their own and the best-off predictions do go wrong. In the week gone by, markets chose to climb a wall of worries and also ignored global cues. They gained on four of the five trading days and lost on just one. BSESENSEX gained 817.68 points or 1.42% to close at 58,387.93 points while NIFTY gained 239.25 points or 1.39% to close at 17,397.50 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.40%, 1.57% and 1.59% respectively. BSEMIDCAP gained 1.78% while BSESMALLCAP gained 2.03%. 

The Indian Rupee was volatile and under pressure. It however managed to remain flattish and gained 2 paisa or 0.03% to close at Rs 79.23 to the US Dollar. Dow Jones gained on two of the five trading sessions and lost on the other three. It closed with small losses of 41.66 points or 0.13% at 32,803.47 points. 

Interest rates are being raised across the world with Central banks worried about inflation, particularly retail inflation led by food and energy costs. Reserve Bank of India raised repo rates by 50 basis points to 7.2%. This makes the hike over the three meetings in May, June and August to 1.40%. RBI has maintained its GDP forecast at 7.2% and expects retail inflation at 6.7% for FY22-23. 

In yet another development, the Bank of England raised interest rates by 50 basis points to 1.75%. This is the steepest single rise by the Bank since 1995. Incidentally, interest rates in England have risen from 0.1% in December 21 to 1.75% in August 22. 

The way Central banks are worried about inflation and are raising interest rates, clearly shows the global concern. Its not a factor affecting one or the other country but global. The never-ending Russia-Ukraine war which is already 165 days old is not helping matters. The good part is that grains shipment has begun from Ukraine and it would help to bring down food inflation. Further, and if nothing else the speculation about wheat or grain being available from the food belt of Ukraine and Russia would be set at rest with such movement.

The GST collection for the month of July was robust at 1.49 lac crs. This clearly sets the expected collection from GST at 18 lac crs for the current financial year 2022-23. While the number has been around 1.41 lac crs in the earlier part of the financial year, this is set to rise as the festive season starts in a couple of months and the impact of the rise in GST rates also starts generating higher collections. 

The week ahead has a trading holiday on Tuesday and this would affect the momentum in the markets. Expect for all practical purposes the market to start trading from Wednesday onwards as people would like to stay light at end of Monday with global markets open on Tuesday. 

Markets have had a smart rise over the last three weeks and have done reasonably well for themselves from the lows made in June 22. The overall rise has been smart, at times vicious where bears were badly trapped and markets gained in about seven weeks around 14.5%. While some sort of consolidation is more than overdue, it may be round the corner or delayed to happen after one more upward thrust. In any case with a strong rally of about 15% in about seven weeks the correction or consolidation would also be volatile and sharp.

Results season would end for the quarter April to June by the end of the week ahead. Post the week ahead, markets would reflect on the quarter gone by and look ahead to the coming quarters. Central banks have raised rates across countries signalling the rising inflation on account of food and energy. While crude oil has softened, it needs to still go down. 

Expect markets to play in a broad range in the coming days. This would be in the region of 59,600 on the upper side and 57,200 on the lower side on BSESENSEX. In case of NIFTY, it would be 17,800 and 17,000 respectively. Use rallies to sell and sharp dips to buy in the week ahead. It would be the period where the large cap continues to dominate the markets.

The week began on a quiet note and markets lost ground on the first two trading days. They then rose quite sharply and gained on the remaining three. BSESENSEX gained 1,498.62 points or 2.67% to close at 57,570.25 points. NIFTY gained 438.80 points or 2.62% to close at 17,158.25 points. The broader indices saw BSE100, BSE200 and BSE500 gain 2.58%, 2.45% and 2.33% respectively. BSEMIDCAP was up 1.65% while BSESMALLCAP was up 1.06%. 

The Indian Rupee gained 61 paisa or 0.76% to close at Rs 79.25 to the US Dollar. Dow Jones had a strong week and gained 945.84 points or 2.97% to close at 32,845.13 points. Dow gained on four of the five trading sessions, losing on just one. 

July futures expired on a very strong note and closed at 16,929.60 points. It gained 1,149.35 points or 7.28% for the month. 

In economic news, the US FED raised interest rates by the expected 75 basis points and the rate band is now 2.25-2.50%. From the minutes of the FED meeting, what transpired is that the balance sheet reduction would accelerate from September 22. Inflation remains high and they hope to bring it down. 

Yes Bank has raised 1.1 billion US Dollars through a preferential share issue and warrants to be exercised into equity at a later date. The bank allotted shares at Rs 13.78 and warrants at Rs 14.82 to Carlyle and Advent International. 

Zee Entertainment and the proposed merger with Sony Pictures has received in-principal approval from the stock exchanges. They would now file the matter with NCLT. 

FPIs after being sellers for the last eight months turned buyers in July 2022 with net purchases of Rs 6,300 crs. This has helped in the markets being more buoyant as the continuous supply of paper has now abated. 

The bidding for spectrum is almost over except East UP which still continues. The government has received so far bids worth Rs 1,49,623 crs, far higher than the anticipated collection. East UP is a dominant territory in terms of traffic and revenues for all the three players, and therefore the bidding has got accentuated and extended. 

In the week ahead, RBI meets between the 3rd and 5th of August for its monetary policy meeting, where interest rates are expected to be raised. While one would have considered the raise to be lower than the last time round, the situation has been changed as this meeting has been preponed. It would be interesting to see how markets react to the change in interest rates and also the commentary from the press conference of the RBI Governor. 

The markets have made strong gains and are quite close to the intermediate tops made in April on 21st and 29th at 57,991 and 57,925 points. The values on NIFTY correspond to 17,414 and 17,377 points. These become substantially important levels for the coming week. If the rally has to sustain and continue, we need to not only cross these levels but also sustain the momentum after crossing them. The last two weeks have seen markets gaining 3,800 points or 7% on BSESENSEX and 1,100 points or 6.8% on NIFTY. This is a steep rise without doubt and markets need to consolidate at these elevated levels before the rise from hereon. Key supports exist at the top of the 13th June gap and then at the bottom of the gap. 

The rally over the last fortnight has been swift and ruthless on the bears. One needs to be sure that when the correction does happen, the fall would be equally swift and ruthless as well. The fact that Dow rose even though interest rates were hiked by 75 basis points for a second time in a row, has ensured the bears whether in India or the US have been forced to square up their positions and exit. The trading strategy would be to sell on any rallies and wait for re-entering the market at current levels. 

It would be of paramount importance to resist the temptation of adding to fresh positions in an overheated market, even though there could be some steam left. Only those who are bold and able to resist will survive. Trade cautiously.