Markets were on a roll in the week gone by on expected lines. However, the extent of the rally was certainly a surprise with they gaining on all five days of the week and now sitting on six straight days of rise. BSESENSEX gained 2,311.45 points or 4.30% to close at 56,072.23 points while NIFTY gained 670.25 points or 4.18% to close at 16,719.45 points. The broader indices saw BSE100, BSE200 and BSE500 gain 4.07%, 3.93% and 3.90% respectively. BSEMIDCAP gained 3.53% while BSESMALLCAP gained 3.86%. More than the rally in the midcap and Smallcap sectors was the fact that the width of the markets has increased significantly and the number of scrips gaining far outweighs those losing. Many scrips have started hitting 52-week highs as well. Is this a cause of worry, not yet.

The Indian Rupee was under pressure but managed to close with tiny gains of 2 paisa or 0.03% to end at Rs 79.86 to the US dollar. Dow Jones gained on three of the five trading days and was up 611.03 points or 1.95% to close at 31,899.29 points. The US FED would be meeting over Tuesday-Wednesday this week to increase interest rates. The street widely believes that the rate hike would be 75 basis points like the previous hike. In related news, the ECB raised interest rates by 50 basis points last week. This increase is their first since 2011. The event should not be taken as one off as interest rates are rising globally

The Russia-Ukraine war is already 151 days old and counting. While the resolution to the crisis still continues to remain uncertain, it has taken its toll on the global economy. For Russia, they have stuck to their guts and are doing business on their terms and conditions. Crude oil has also softened and in keeping with the same, the windfall tax and export duty on diesel and petrol introduced by the Indian Government has also been withdrawn. 

Results season has picked up steam and the same is a mixed bag. While the banking sector has shown that the economy has gathered traction in the April-June quarter with demand for funds, there are concerns on inflation and costs. All in all, results indicate a positive trend and augur well for the coming quarters. 

FPI selling seems to have abated for the time being. In the previous week when markets rose significantly, they were buyers on four of the five trading days. On a weekly basis they bought equity worth Rs 4,037 crs while Domestic institutions were buyers of equity worth Rs 940 crs. If this trend continues, it will also help in bringing the dollar value to a more respectable level. 

July futures expire on Thursday the 28th of July. The present value of NIFTY at 16,719.45 points is higher by 939.20 points or 5.95%. It’s a huge lead for the bulls and they are unlikely to allow it to be lost. However, with six straight days of gains, Dow losing ground on Friday, FED meeting to increase interest rates on Wednesday, would all add pressure on the bulls. Expect markets to be choppy and volatile in the coming week rather than a straight uptrend during the previous week. 

Last week’s rally has ensured that the 13th June gap which was troubling the markets for about a month is temporarily behind us. The gap was between 53,207-54,205 points on BSESENSEX and 15,886-16,172 points on NIFTY. It was a huge gap and was about 2% of the value of the indices. The top of the gap would act as a strong resistance in the coming weeks while levels towards the bottom of the gap would be the second level of support. 

Coming to the markets in the week ahead, they would have volatility, news flow and a more definite view of FPIs and their immediate future course of action. July futures expiry and the FED raising interest rates are foregone conclusions. The key this time around would again be the commentary about the likely outcome of the future FED meetings. This would be a week of consolidation for the benchmark indices while the movement in Smallcap and midcap may continue for a few more days. For the smart investor it’s time to book some profits in the large cap stocks and concentrate on those from the midcap space which are to declare results and play on the volatility. 

Expect both sided moves which would be swift as well in the coming week. After a spectacular rally of close to 5% in the last six days, markets need to cool off as well. Further having come out of a bearish phase, they need to digest the gains of the previous week which were quite sharp. The strategy would be to book profits as markets gain and look for first signs of the short-term correction which is imminent. It would be advisable to build long positions in this correction as the next up move would be sharper and take indices even higher. 

The week gone by was volatile and contrary to expectations ended with losses. It did show positive signs and despite losing on the first four days of the week, registered gains on Friday, leaving a lot of hope and expectations for the coming week. BSESENSEX lost 721.06 points or 1.32% to close at 53,760.78 points while NIFTY lost 171.40 points or 1.06% to close at 16,049.20 points. The broader indices saw BSE100, BSE200 and BSE500 lose 0.66%, 0.37% and 0.26% respectively. BSEMIDCAP gained 0.88% while BSESMALLCAP was up0.54%. This makes one believe that the breadth of the market was good. 

The Indian Rupee continued to be under pressure and lost 63 paisa or 0.79% to close at Rs 79.88 to the US Dollar. This is the lowest closing of the Rupee against the dollar on a weekly basis. Dow Jones lost on the first four days of the week and gained on Friday. At the end of the week, the closing was flattish with Dow Jones losing 49.89 points or 0.16% to close at 31,288.26 points. The gains on Friday were 658 points. 

In what could be termed as an important news, RBI has permitted settlement of international trade in Indian Rupees. This will go a long way in mitigating operational risks of importers and exporters. It will also help in a big way of making the rupee convertible in the longer run. 

Results from technology and IT companies highlighted the rising costs associated with substantially higher attrition and therefore rising employee costs. After TCS, it was the turn of HCL Tech which faced the same issue. Post results, the share of HCL was under pressure and lost Rs 101 or 10.26% to close at Rs 883. The BSETECK and BSEIT were the biggest sectoral losers of the week losing 5.87% and 5.82% respectively. 

EV or electric vehicles seem to have a strange set of problems. It all began with the infrastructure required for the charging of EV’s. Then it was the issue of some of the electric scooters catching fire. Now it is the financing of vehicles by banks and NBFCs. The cost of an EV vehicle is roughly 2/3rd for the battery and 1/3rd for the car. For example, a vehicle costing Rs 12 lacs would be broken up as Rs 8 lacs approximately for the battery and Rs 4 lacs for the car. How the battery behaves or is maintained by the user will decide the residual value of the car for the lender. Herein lies the problem and the conflict area. One would be sure that going forward the issue would get resolved, but for the time being, people looking to finance an EV need to reassess their requirements. 

Markets seem to be showing signs of resilience even though they were down for the week gone by. The week was choppy and FPI selling continued even though it was lower than the Rs 2,600 crs average per trading day of June 22. The net sales for the five-day week were at Rs 5,914 crs or a daily average of Rs 1,182 crs. For the first fortnight of July, FPIs have net sold Rs 10,459 crs or Rs 1,045 crs as a daily average. This is not to suggest that FPI selling would stop, but just that probably they could start buying sooner than later. The attractive value of the Rupee is another positive factor from an FPI perspective. The fact that there would be another rate hike of most likely 75 basis points in the US has also been discounted by the markets. 

Coming to the week ahead, one should see markets consolidating from levels achieved last week. Friday saw a decent level and gives hope for the immediate week. On resistances, the first level would be top of the gap which we had crossed last week at 54,205 and 16,172 points. Once this is done, we have another resistance in the form of an upward gap made on 30th May to take care of. This gap was made when the markets opened with a big gap on Monday in that week. The levels to be countered are 54,936-55,466 on BSE and 16,370-16,506 on NSE.

On the support side, we have immediate support at 53,450-53,550 and 15,800-15,850 respectively. This would be followed by levels of 52,700-52,850 and 15,500 and 15,550 levels. The market would need solid strength to surmount the gap which was crossed and then failed the first time. While we are almost there, two days of sustaining at these levels would be enough. 

The strategy for the week would be to avoid overnight short positions as markets have the uncanny habit of opening with sharp gaps. Trade long and it might be a good strategy to look at midcap stocks which have results coming up. Pick those stocks which have shown improved performance over the last couple of quarters as we return to normalcy post covid.