Market Outlook August 2015

Market Outlook August 2015

The Fortnight that was

Equity benchmarks traded in a range and closed the week with marginal gains. RBI maintained status quo by keeping key policy rates unchanged in its third bi-monthly monetary policy review.

Nifty closed in green in three out of the five trading session while oscillating in a 150 points range during previous week.

The broader markets continue to outperform the benchmark indices as the BSE midcap and small cap index closed up by 2.5% and 2.3% respectively.

The 30 share S&P BSE Sensex closed at 28241, up by 126 points or 0.45%, while the NSE Nifty settled at 8564, up by 31 points or 0.37% for the week.

Amid Nifty constituents, Asian Paints, State Bank of India, Bosch, Sun Pharma, Dr Reddy, Infosys, Maruti, Tata Steel, Larsen & Toubro and PNB were top gainers where as BHEL, Coal India, Gail, HCL Technology and HDFC were the major draggers in the index.

Among the large cap companies Bharti Airtel, M&M, Britannia, Marico, Bharat Forge and Hero Honda reported good set of quarterly numbers (Q1FY16) primarily on the back of expansion in gross margins as most of these company’s benefited from the global fall in commodity process (industrial & agricultural) /subdued raw material costs. Tata Motors reported mixed set of Q1 numbers.

As per the latest release by the Indian Meteorological Department (IMD), India, as a whole, has received cumulative rainfall that is 6% below average (LPA), for the period between June1 – August 6, 2015.

Northwest India has received rainfall at +4% of LPA, Central India at -4% of LPA, South peninsula at -21% of LPA and East & Northeast India at -9% of LPA in the aforesaid period.

Crude prices closed at about US$ 49.4/barrel, down 2.3% during the week. Gold prices were down by 0.2% during the week ending at 1093.3 $/ounce. Bond yields closed at 7.82% up 1 bps during the week. Fortnight Ahead The weekly price action formed a small bullish candle with shadows in either direction indicating range bound trade with positive bias. The index has so far consumed eight sessions to retrace 80% of the preceding four session fall from recent swing high of 8654 to 8321. The slower pace of the current pullback corroborates our stance of a range bound market scenario while stock specific action continues to dominate the Street. The thriving performance of broader markets with the midcap index hitting new life-time highs while benchmarks are still under consolidation between broad range of 8300 to 8650, highlights the underlying positive market sentiments. Structurally, the last two rising segments on the Nifty in June and July 2015 measured approximately 350 points. Therefore, to confirm a positive price structure, the current up move from last week’s low of 8321 should be larger in magnitude than the preceding two up moves as that would also maintain the sequence of higher top and higher bottom formation and signal continuance of the uptrend We expect the markets to conclude the recent consolidation in the coming few weeks and gradually head towards its April 2015 high of 8850 over the next few months. The confluence of 80% retracement of the entire correction from March to June 2015 (9119 to 7940) near 8850 makes this a key short-term hurdle for the index The panic low formed on Tuesday (8448), which also coincides with last Friday’s bullish gap area placed between 8448 and 8421 will act as an immediate technical support for the index. From a short-term perspective, we believe the base for the index has shifted upwards to the 8200 region, which is the confluence of the 61.8% retracement of entire up move from June 2015 bottom of 7940 to last week’s high of 8654 at 8200. Happy Investing Source:Icicidirect.com