With the start of the results season in the upcoming week, the market will become more stock-specific.
During the week, Nifty found support near highest Put base of 10,600 and staged a recovery as well. In fact, it has ended above 10,700 for the sixth consecutive week. The index has shown tremendous resilience, given the rupee depreciation from 67 to 69/USD during this period.
A weaker rupee has pushed up stocks in technology and pharmaceuticals space. Also, the buyback offer by Tata Consultancy Services (TCS) also kept the stock at a higher band.
As such, volatility has been lower, thus supporting the positive bias for Nifty. With the start of the results season in the upcoming week, the market will become more stock-specific.
The highest Call base for July series is placed at 11,000 strike, which means after some consolidation the Nifty can recover towards 11,000.
Bank Nifty: 26,200 remains a crucial support for upside to continue
The index has continued to hold 26,200 since June. Market participants respected the same levels in July as well from where the index rallied above 26,500.
Private sector banks continued to outshine, while midcap stocks such as Yes Bank and IndusInd Bank also saw a fresh upmove.
As US imposed sanctions of USD 34 billion on Chinese imports, trade war fears further intensified.
However, most of these cues are factored in and there is no panic which was seen last week. The 26,200 Put continued to see an addition in the past few weekly expiry.
Positions have also been formed in 26,400 Put which can be seen as an intermediate support for the index. On the Call front, OI is well distributed in 26,700 to 27,000 strikes that can be a potential target on the upside.
Looking at the increasing discount on the index, we feel a close above 26,700 is likely to trigger short covering. The price ratio of Bank Nifty/Nifty remained near 2.46 levels.
We feel the ratio is likely to improve and the outperformance in the banking stocks can be seen once the index manages to end above 26,700
Emerging markets cautious amid higher crude oil prices:
Emerging markets (EM) continued to remain under pressure as trade war concerns continue to remain an overhang. MSCI EM index tested almost one-year lows weighed down by weakness in EM currencies triggered by outflows.
Although US FOMC minutes were cautious about recent global trade friction, they continued to envisage strength in the US economy.
The Fed is expected to increase interest rates in September while probability is building up for a fourth rate hike in December 2018.
Emerging markets saw mixed flows in equities during the week. Indonesia (USD 65 million), Malaysia (USD 77 million), Taiwan (USD 705 million) and Thailand (USD 266 million) witnessed outflows.
In the upcoming week, market participants would brace themselves for a bout of volatility if the US moves further to impose tariffs on USD 200 billion of Chinese imports as announced earlier by US President.
We could see further pressure on emerging markets as well as currencies if the trade friction escalates to the next level of additional tariffs impositions.
MORE WILL UPDATE SOON!!
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