Indian markets extended the rally in the second (trimmed) week ended March 17, adding nearly four per cent as foreign institutional investors (FIIs) became net buyers after 10 weeks, easing tensions between Russian and Ukraine and crude oil prices. Fell down For the week, the BSE Sensex closed 2,313.63 points (4.16 per cent) higher at 57,863.93, while the Nifty 50 ended 656.6 points (3.94 per cent) higher at 17,287.05. All sectoral indices ended in the green with Nifty Auto and Bank indices rising over 5 per cent each and Realty index up 4.7 per cent. The broader indices – BSE mid-cap and small-cap – rose two per cent each, while the large-cap index gained four per cent.
Ajit Mishra, VP Research. Religare Broking said: “Markets extended the rally and gained around 4 per cent, largely tracking favorable global cues. Optimism around the de-escalation of the war between Russia and Ukraine combined with a sharp drop in crude aided sentiments. Moreover, no negative surprise from the US Fed also came as a relief to investors. As a result, both the benchmark indices, Sensex and Nifty, closed the week highs at 57,863 and 17,287 levels. All sectoral indices participated in the move and broader indices also posted good gains.”
In the absence of any major event, global signs viz. The focus will be on the Russia-Ukraine war, the situation of Kovid in China and the movement of crude oil. In addition, participants will also have a look at the inflows of FIIs.
FII
Santosh Meena, Head of Research, Swastika Investmart Ltd said: “FIIs who have been selling consistently for the last five months made a comeback last week with some buying and it will be interesting to see how the market performs when they continue their buying. In the last 5 months, he has sold over 2.3 lakh crores in the Indian equity market which is his highest ever. Prior to this, their highest sales were in 2008 during the global financial crisis, which was about 1.3 lakh crores.
“The interesting thing here is that in 2008 Nifty and Sensex had registered a fall of 60-65 per cent due to sales of Rs 1.3 lakh crore, but this time, Nifty and Sensex declined only 15 per cent despite much higher selling by FIIs. registered. The domestic currency shows strong resilience this time around and we are no longer completely dependent on FII inflows. Our markets are in a much better position than most of the emerging markets and we have seen a strong rally from the lower levels so there could be some relaxation among FIIs and they may come back aggressively in the Indian markets which would give a fuel could. More rally in our market,” Meena said.
global signal
On a similar pattern as the US Fed, the Bank of England raised the bank rate by 25 basis points to 0.75 per cent. Given the current tightness in the labor market, continued signs of strong domestic cost and price pressures, and the risk of those pressures persisting, the Committee decided that a 0.25 per cent increase in the bank rate is required at this meeting. The committee expects inflation to rise to 8 percent in the second quarter of 2022, and perhaps even higher by the end of this year. According to the committee, the impact of Russia’s invasion of Ukraine will likely lead to both a peak in inflation and an adverse effect on activity by intensifying pressure on household incomes.
With the recent scenario in India opting for rate hikes by both the major central banks, the focus will now be on the RBI which will introduce the country’s first bi-monthly monetary policy in early April.
Talking about Friday’s performance, S Ranganathan, Head of Research, LKP Securities said, “Positive global cues following the Fed rate hike, softening oil prices and progress in Russia-Ukraine talks boosted the confidence of the bulls.
Nifty Technical Outlook
Technically, Nifty is giving proper follow-up to the Bullish Engulfing candlestick formation on the weekly chart while it managed to close above its 200-DMA and 50-DMA although the 100-DMA of 17380 is an immediate hurdle; Above this, we can expect further strength towards the 17,600/17,800 level. On the downside, 17,200 should act as an immediate support level while the 200-DMA of 17000 will be a strong base on any pullback.
bank nifty
Banknifty also witnessed a strong pullback from lower levels however 36,700-37,300 is an important resistance area and if it manages to break out of this zone we can expect a short covering rally to 38,000/38,500 levels. On the downside, 36,000 is the immediate support while 35,500/35,000 is the next support level.
What should investors do?
Mishra said: “The recent rally has certainly eased some of the pressure, although stability will largely depend on global cues. The tension between Russia-Ukraine and any news of the worsening of the Kovid-19 situation in China can again affect the sentiment. In the midst of all this, we suggest maintaining a positive but cautious approach, focusing on overnight risk management. On the index front, Nifty has the potential to test the 17,500-17,700 zone. In case of any downside, 16,800-17,000 will act as a cushion. Metal, energy and pharma can outperform others in sectoral packs, so plan your trade accordingly.”
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