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The new week is expected to open on a positive note, gaining over one per cent at the start. SGX NIfty at 15,860 (7 am IST) indicates that the perceived pull-back rally would continue. Cues from the global market, too, are positive.
According to analysts, the market will remain volatile as June month F&O contracts will see settlement this Thursday. "Ahead of F&O settlement, traders will take decisions on a lot of positions and if the market sustains the rally, one could see violent positive momentum due to short-covering, given the huge build-up of short positions on both the Nifty and Bank Nifty," said a Chennai-based market expert said.
Equities across the Asia-Pacific region are up between 0.7 per cent and 2.3 per cent in early deals on Monday. Most markets are building up on Friday's rally. US stocks made a strong recovery on Friday, with Nasdaq jumping over 3.3 per cent.
Focus on other factors
The market will now look for other factors as the currrent headwinds, including rate hike fears, inflation, and a slow-down are already discounted, said marketmen.
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management said: “The market recorded some recovery in the last couple of days with the moderation in oil prices, and the widespread and deepening fears of a recession."
The global economic growth rate is already pitched lower by many international agencies. The interest rate action and liquidity normalisation are likely to pull down growth over a period of time, and therefore, the focus on price level may have to be progressively moderated, and this may support the economy in the future."
The coming week would also witness some amount of volatility as the sky is still overcast with clouds of uncertainty, he added.
Mitul Shah, Head Of Research at Reliance Securities, said: "As the heatwaves have diminished, monsoons will influence India's economic outlook in the coming weeks. Farmers and the Centre are banking on the monsoon rains to keep rice production, inventories and food inflation at a manageable level. Moreover, with Q1-FY23 nearing its conclusion, investors are prepping for corporate earnings results for the quarter."
Will FPIs return?
However, for the rally to sustain, foreign portfolio investors must return, said analysts. FPIs have been offloading heavily in the market. Since October 2021, they have pulled out almost ₹2.65 lakh crore in equities.
Technically, on weekly charts, the Nifty has formed a long bullish candle, which is broadly positive, said Amol Athawale, Deputy Vice-President - Technical Research, Kotak Securities Ltd.
On the daily and intra-day charts, the market is holding a higher bottom formation that also supports a short-term uptrend, he added. "For the bulls, 15,700-15,750 would act as a key resistance level, while on the flip side 15,500 and 15,400 could be strong support zones for short-term traders. Above 15,750, the index could move up to 15,850-15,925. On the other side, a fresh round of selling is possible only after 15,400, and below the same, it could re-test the level of 15,250-15,150.”
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