Bulls Are Back, Short Term Trend Can Be Positive..

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By Gaurav Bora, Market Expert

Benchmark indices made strong bounce back in last week, index respected support shown upside move. Nifty gained 4.2% and Sensex gained 4.1% in last week. Midcap and Smallcap index also participated in pull back gained 2.9% and 2.1% respectively. Monday market will first react to Q4FY20 GDP data which is 3.1% which is better than street’s expectation. Lock down get relaxed in country market will take it positively but lockdown in containment zones will get extended till June 30 though many countries in the West have started re-opening economies. Hotels, restaurants and shopping malls will be reopened in phase one. This week’s rally was supported by FIIs; FII inflow was strong in the week gone by with net buying at over Rs 8,000 crore which includes the Bharti Airtel stake sale deal. The number of COVID-19 cases being reported every day has been rising, now 6,000-7,000 cases are being reported on a daily basis as compared to 3,000-5,000 per day in the previous week. India’s total no of patients crossed 1.7 lakh-mark which includes nearly 5,000 deaths, however the recovery rate remains strong at around 45% and market will closely watch this figures.

Reliance’s biggest right issue of 53125 crore will get closed in this week on June 3. Microsoft looks to grab $2 billion stake in Reliance Jio platform. US President Donald Trump’s aggressive stance against China ahead of the presidential election in November, tensions between the world’s largest economies is unlikely to reduce. On the macro front Markit Manufacturing PMI data for May will be released on June 1 and Services PMI for May on June 3.

Key factors for the week:

• Monsoon already arrived in Kerala on May 30. Monsoon is the next key factor to focus on in the coming weeks as it is important for agricultural production. Normal and timely arrived monsoon will ensure kharif crops get sown properly and it will help to revive rural economy.

• May auto sales figures will be announced on Monday, June 1. After zero sales in April, on hope of normal monsoon and a good rabi harvest, there has been an increase in enquiries for passenger vehicles and two-wheelers in May especially in rural areas as there is demand for tractors.

• We will enter the last phase of March quarter earnings season this week, which has been extended by a month by the SEBI due to the nationwide lockdown. More than 75 companies will declare their quarterly results this week including the frontline stocks such as the Larsen & Toubro, SBI, Britannia Industries, BPCL, Aurobindo Pharma, SRF, Relaxo Footware and Alkem Laboratories.

• Relaxation of lock down except containment zone will be positive for markets.

Technical View:

Nifty has broken its range and decisively surpassed 9,500 mark last week, if Nifty crosses and sustains above 9,600 levels then the rally may continue towards 9890. The short term trend of Nifty continues to be positive. Any correction towards 9,400 could be a buy on dips opportunity for the next week. June series started on a strong note, while the rollover was strong at Nifty (75.7%) as well as Bank Nifty (81%). Maximum call open interest at 9500 followed by 9700 and maximum put open interest at 9200 followed by 9000. On downside Nifty has to hold 9400 mark, 9400 will act as strong support for market. India VIX reached to 30 levels during the last week, cool-off in volatility which is supportive for bulls.