What was essential last week was for the market to close above the resistance line of 24,277. Except for one day—made possible courtesy of the new CAS settlement system—the highlight of last week was the inability to cross this level even once. After the final trade at 24,260 last Tuesday, the new settlement price pushed the closing price to 24,334. Unable to sustain this momentum in the following days, the Nifty closed at 24,175 on Friday. The new closing auction session is causing major headaches in options trading, just as it is on the charts. We cannot expect this situation to change without an improvement in liquidity.
Looking at other macroeconomic developments, Brent crude closing at 88 by the end of last week offers some relief for India. What needs to be watched in the coming days is whether it sustains below the crucial 90.43 mark. On the downside, the next support area to watch is 82.38. At the end of last week, Gold stood at 4,454, right next to the 4,422 support level. Maintaining 4,422 on a closing basis is critical to keeping the bullish trend in Gold intact. The Rupee closed at the 95.61 level last week; the immediate level to watch is 95.05.
The event that grabbed the most attention last week was Kevin Warsh’s Jackson Hole speech on Friday. With controlling inflation remaining the primary focus, it reinforced the view that interest rates will need to be raised in the near future. Most analysts believe that even if a rate hike doesn’t happen in September, it will be necessary by November or December. It has become fairly clear that Warsh, the Fed Chairman brought in by Trump to cut rates, is now tasked with raising them. We are also seeing that inflation and debt burdens are causing bond yields to remain elevated. The 10-year US Treasury yield reaching 4.73 and the 30-year Treasury yield hitting 5.21 certainly send a negative signal.
Among the key factors to watch in the coming days, the first will be India’s GDP numbers releasing on Monday. The market generally expects a lower figure of 7.1%. Stronger performance in the manufacturing, electricity, and construction services sectors would signal an improving domestic cycle. Automobile sales data and GST collection figures, both coming out on September 1, also need to be monitored. On September 3, the US ISM Services PMI will be released, which will help gauge the strength of the US services sector and assess recession fears. India’s Services PMI is also scheduled for release on the same day. Friday brings the US job report for August; last month’s payrolls had seen an unexpected drop. As we move into September, it is also a month where two mega IPOs—NSE and Jio Platforms—are expected. The news that HDFC Bank CEO Sashidhar Jagdishan will not continue for another term is also significant for the market. Who will replace him is a crucial question, and several prominent names from both inside and outside the bank have already started doing the rounds. Whether a leadership transition will bring massive changes to HDFC Bank, similar to IT giant TCS, is a question that needs answering in the coming days.
Analyzing the Nifty’s levels, from last week’s close of 24,175, the immediate resistance zone to watch remains 24,277. If it manages to close and sustain above this, the 24,405 – 24,677 levels become important. On the downside, the first support to watch in the coming days is at 24,111. A close below this will lead to a testing of the 23,954, 23,843, and 23,783 support levels. The start of a recovery in Bank Nifty and the continuing upward momentum in the IT index provide hope for the bulls. Over the past two years, the sluggishness in these two major sectors caused the Nifty to underperform globally. A strong comeback in the Nifty can be expected, especially if the private banking sector supports the resurgence of the IT sector. Whether a leadership change in the frontrunners of these two sectors is merely a coincidence remains to be seen.