Last week, 23,930 was seen as the crucial support level on the downside, while 24,175, 24,284, and 24,482 were identified as the resistance levels that needed to be breached on a closing basis. Although the index closed below 23,930 in the early part of the week, it bounced back to 24,176 the following day, touched a high of 24,378 on Friday, and ultimately settled at 24,270.
The RBI’s strict restrictions on funding for proprietary trading, effective July 1, cast a shadow over the market at the beginning of the week. However, two major developments on July 3 helped the market stage a strong recovery:
US Rate Cut Hopes: With reports showing US job data falling short of expectations, market hopes grew stronger that the US Federal Reserve might cut interest rates in September. This scenario is considered highly beneficial for emerging markets, including India. Consequently, the 10-year US Treasury yield cooled down to 4.15%.
Rural Recovery Validation: On the same day, June auto sales figures were released, showcasing strong performance from the rural sector. The robust sales of two-wheelers and utility vehicles act as clear indicators of a rebounding rural consumption story.
These two factors injected fresh momentum, helping the bulls make a vigorous comeback mid-week. Additionally, the lack of significant growth in China’s manufacturing sector is helping to cap the global surge in industrial metal prices. This will assist Indian specialty chemical and capital goods manufacturers in procuring raw materials at reasonable rates, drawing investor attention to these sectors. A massive influx of new orders from the Defense Department has further boosted investor confidence in the infrastructure and defense spaces.
Global Macros & Commodities
Dollar Index: The Dollar Index stood at 100.62 last week. Failing to close above the previously mentioned hurdle of 101.43, this retreat could extend down to the support zone of 99.39 – 99.20.
Brent Crude: Brent crude is currently hovering at the 72.12 level. On the upside, the primary resistance zones to watch are 73.47 and 74.50. If it fails to breach these levels, Brent crude will likely target the 56.35 support level. News flow from the Middle East will undoubtedly dictate its trajectory.
Gold: After dropping to 3958, Gold rallied over the last three days to reach 4187. The resistance levels to watch out for on the upside are 4382 and 4422.
S&P 500: Last week, the US S&P 500 closed at 7483. It is currently positioned between a crucial upside resistance at 7595 and an equally important downside support at 7426. These two key levels hold the power to dictate upcoming trends. A close below 7426 would suggest the beginning of a correction towards the 5228 – 5556 – 3806 levels. However, sustaining a close above the 7595 mark will open the doors to targets of 8268 – 8924.
Nifty Technical Outlook & Sectoral Shifts
Coming back to Nifty, the index closed at 24,270 last week. In the coming days, the immediate resistance levels to watch on the upside are 24,340 and 24,482. A decisive close above each of these levels will unlock the potential for a strong bullish rally.
Conversely, if this fails and the initial support of 24,202 is lost on the downside, the next key support to watch will be 23,829. If this level is also breached, the bears will take control, potentially dragging the Nifty down toward the 23,300 support zone.
Last month, we witnessed the IT Index trending downwards while Bank Nifty moved upwards. The trading action over the past two days has sparked speculation about whether this trend will reverse. Ultimately, it is the market that will provide the answer.