The market began last week with a massive crash. Following crude oil trading near the 114 level at the start of the week, the market opened with a significant gap-down on Monday. The Nifty touched a recent low of 22471. However, in the days that followed, crude cooled off to the 92-97 levels after the US President announced a temporary halt to the war. This sparked a market rally, pushing the Nifty up to 23465. But by Friday, the final trading day of the week, tensions escalated again on the war front, causing crude to surge and the markets to face another downturn. At Friday’s close, the Nifty was at 22819, and crude was trading near the 105 mark. Let’s look at what to expect in the coming days.
Upcoming Truncated Week & Economic Impact
This month’s settlement takes place on Monday. With holidays for Mahavir Jayanti on Tuesday, March 31, and Good Friday on April 3, we have a truncated week with only 3 trading days ahead. Although consensus efforts are underway, the renewed war cries from both sides are increasing market pressure. While India has not yet passed the burden of the oil price hike to the market by reducing excise duty, a significant drop in government revenue will have far-reaching negative consequences.
Every $10 increase in crude oil adds an estimated $12 to $15 billion to India’s import bill, as we import 85% of our crude oil requirements. A rise in crude prices directly impacts India’s Current Account Deficit (CAD):
When oil trades at the 60-70 level, the CAD remains below 1% of GDP, which is an economically secure position easily offset by foreign investment.
However, when crude crosses 100, the deficit rises to 2% of the GDP. This means the country is spending a larger portion of its income on imports.
Credit rating agencies view 2.5% as a danger zone. Breaching this can negatively impact the country’s credit rating and lead to a decline in foreign investments.
As the deficit widens, the demand for the dollar increases, causing the rupee to depreciate, which in turn leads to inflation. In short, sustained high crude prices will disrupt India’s economic balance and slow down GDP growth.
Key Crude Levels to Watch
The crucial levels for crude remain the same as mentioned previously:
Resistance: The 115.93 level is highly critical. Sustaining a close above this is like playing with fire, as it opens up upside targets of 143, 156, and 180. (This detailed explanation highlights how such a move would impact our economy and stock market).
Support: On the downside, 91.15 is the key support. Last week, crude briefly touched 91.70. A close below 91.15 is the primary requirement for crude to finally “cool off.”
Currency and Commodities Outlook
US Dollar: The dollar continues to strengthen. Last week, it held its key support at 99.38 and closed at 99.98. Though it closed below 99.38 for a day early in the week, it bounced back vigorously. Going forward, the 100.88 – 101.43 zone will act as major resistance. The dollar will enter a bullish orbit only if it crosses these levels.
Indian Rupee (INR): The rupee crossed the 94.10 target last week and ended at 95.06. If it sustains the key level of 94.07 on a closing basis, new downside targets for the rupee (upside for USD/INR) open up at 97.86, 99.68, and 101.91. The rupee will likely strengthen only if it moves below the 93.73 mark.
Gold: Gold closed the week at 4524. The strengthening dollar is keeping gold under pressure. The crucial support to hold on the downside is 4422; if it fails to sustain this, gold will enter another downward spiral. On the upside, 4651 is the key level to watch. Sustaining above this would indicate gold is regaining strength.
Silver: Silver closed at 69.79 last week. Earlier in the week, it came very close to the 60.87 support, touching 61.23 at one point. To turn bullish, it must break past the 73.91 – 75.36 resistance levels.
Nifty Technical Levels
Coming to the Nifty, here are the key levels to watch in the upcoming sessions:
Support: The immediate support is at 22627. If this breaks and close below it, then bears will target the 22254, 21930, and 21743 levels. A breakdown below these could drag the index toward the major support at 20729.
Resistance: If Nifty defends the 22627 support and manages to close above 23047, we can expect a move toward the 23310 – 23862 levels. Beyond that, the previously mentioned 24058 – 24303 zone will act as a major resistance hurdle.