Last week, the 24,277 level was seen as the major resistance zone for Nifty on the upside. It was expected that a close below 24,111 would lead Nifty to test the support levels of 23,954, 23,843, and 23,783. Last week, Nifty never managed to reach the 24,277 resistance zone; instead, it broke below 24,111 and came very close to 23,783. The highest level reached last week was 24,143, and the lowest was 23,786. The market was literally pulled in two different directions: positive news such as the GDP data, the US jobs report, and domestic auto sales data from last month, versus negative news like oil prices surging to 95 due to escalating tensions with Iran and a sharp global spike in bond yields. In short, despite strong domestic macros, the market was forced to remain weak last week. GDP growth stood at 7.8%, well above the expected 7.1%. Manufacturing grew by 9.2% and services by 10%. Following this, the GST collection data showed a growth of 14.8% last month. The US unemployment data cooling down to 4.1% also brought some relief. Looking at the data in the coming days, the US CPI and PPI data releasing on the 10th and 11th need to be watched. Even a slight dip in inflation will help reduce volatility in bond yields. India’s CPI and IIP data will be released on September 12. There are hopes of rate cuts for the auto, cement, consumer durable, and insurance sectors during the GST Council meeting held on September 11-12. Since decisions regarding this will come on Saturday, September 12, weekend event risk should be expected in the stocks of these sectors this week.
Coming to the sectors, Pharma, Realty, Auto, Media, and Banking have maintained a bullish trend. Metals, Energy, Commodities, and Infra sectors are showing weakness, while FMCG and PSU sectors continue to lag behind. The sectors showing an improving trend are Consumption, Financial Services, IT, and Services. Depending on the shifting concerns regarding inflation, these trends may change in the future.
Returning to Nifty, the first support to watch is 23,783, which is very close to last week’s closing level of 23,897. If it fails to hold this, it will mark the beginning of the next fall. In a downward move that could potentially extend to 23,079, the nearest expected support zone is at 23,606. Now let’s examine the upside possibilities. The first challenge for the bulls in the coming days is to secure a close above the 23,999 level. The next hurdle is crossing and closing above the 24,278 resistance zone. Above this, the resistance zones of 24,378, 24,430, and 24,678 must also be watched. The movement of Brent crude will be the biggest issue affecting the market. Crude, currently consolidating around the 94-95 level, will maintain its positive forward momentum as long as it stays above 90.15. The subsequent targets would be the 108, 111.25, and 116 levels. If such a move occurs, it will cause petrol and diesel prices in India to spike, subsequently pushing up inflation. Oil prices and the resulting inflation are the primary reasons the market is turning a blind eye to positive macroeconomic factors. Since no immediate relief is expected on this front, the best approach right now is to make stock-specific decisions rather than waiting for a major market-wide trend.