Markets Outlook This Week: How Will Sensex, Nifty Perform Amid RBI Policy?

Indian markets ended the trading week from July 31st to August 4th on a bearish tone as feeble global cues dampened the mood owing to the US credit rating downgrade, FIIs selling, weak factory activity data from the Eurozone and China and surge in dollar along with bond yields. Both Sensex and Nifty 50 settled the week with nearly a per cent drop. In the coming week, RBI's monetary policy will take centre stage, while macroeconomic data will be keenly watched as well amidst ongoing Q1 earnings.

On Friday, Sensex ended at 65,721.25, up by 480.57 points or 0.74%. Nift 50 settled at 19,517, surging by 135.35 points or 0.7%. In the trading week that ended on August 4th, Sensex dipped by 484.04 points or 0.73%, while Nifty 50 tumbled by 115.30 points or 0.59% -- making it the second consecutive bearish week.

While FPIs selling stood at Rs 2,034 crore in Indian equities from August 1st to 4th. They are net buyers to the tune of Rs 46,618 crore in July month.

Talking about the week's performance Ajit Mishra, SVP - Technical Research, Religare Broking said, "Markets traded under pressure and lost over half a percent, in continuation to the prevailing corrective phase. After the upbeat start, pressure in the middle pushed the index lower as the week progressed however a rebound in the final session trimmed some losses. Eventually, both the benchmark indices, Nifty and Sensex, settled at 19,517 and 65721.25 levels respectively. The majority of sectors traded in sync and edged lower wherein realty, FMCG and auto were the top losers. Amid all, the broader indices managed to outperform for yet another week and gained nearly a per cent each."

Mishra added, "We are largely mirroring global counterparts and indications are pointing towards a further slide, which may put further pressure on our markets. However, the downside seems capped, citing strong support around the 34600-34900 zone in the key US index, Dow Jones Industrial Average (DJIA)."

What to expect in the trading week from August 6th to 11th?

In the current week, Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, "The market will also have an eye on the RBI MPC meeting, which will be announced on August 10, 2023. The RBI may reportedly keep the benchmark repo rate unchanged in its upcoming bimonthly policy review. The RBI has kept the Repo rate unchanged at 6.5% Since February."

Further, Gour added, "We are heading towards the last batch of Q2 earnings of key companies such as Adani Ports, Apollo Hospital, Coal India, Grasim, Hero MotoCorp, Hindalco, ITC, and ONGC, among others, which will lead to stock-specific movements."

Similarly, Arvinder Singh Nanda, Senior Vice President, of Master Capital Services added that the market will react to the upcoming RBI Policy, Inflation data, forex reserve, ongoing Q1FY24 earning season, crude oil inventories, US inflation data, US Initial jobless claims, and UK GDP Data will come in the upcoming week.

Nanda highlighted major companies will be announcing quarterly results such as Indigo Paints, Emami, Torrent Pharma, Aarti Industries, Adani Ports, Coal India, Hindalco, NMDC, Oil India, Bata India, Bharat Forge, Tata Power, ZEEL, 3M, Bajaj Electrical, Hero Motocorp, LIC, Apollo Hospitals, Godrej Industries, IRFC, Info Edge, ONGC, Voltas and many more.

On the global front, Gour mentioned that the trend in global stock markets, the movement of the Dollar index, the rupee against the dollar, and crude oil prices will also dictate the trend. On the Marco front, market participants will be closely observing key events like Industrial Production and Manufacturing Production data, which will be released on August 11, 2023. China will announce the inflation rate for July on August 9, 2023. Additionally, Institutional activity will also have a significant impact on market trends.

From a technical analysis perspective, Nanda said, "the market found support at an important level around 19300 and closed above 19500. The Relative Strength Index (RSI) had previously been in the overbought zone, but it has now come down to 67, indicating a potential easing of bullish momentum. The market is still supported by the 55-day Exponential Moving Average (EMA). Overall, the market remains uncertain, and investors should closely monitor the support and resistance levels, technical indicators, and global economic developments to make informed decisions."

While Gour added that Nifty is currently finding support at the 19300 level, and there was a recent correction from the 20000 mark. The 20-DMA (Daily Moving Average) located around 19600 is a crucial resistance level that Nifty needs to overcome. If Nifty manages to close above its 20-DMA, it may indicate a resumption of bullish momentum. However, there is a risk of nifty falling further to the 18888 level if it slips below the 19300 support. Traders should closely monitor the price action around these levels to assess the market's direction.

In case of Banknifty, Gour said that the index has shown some strength by regaining its 50-DMA. But there is another critical resistance at the 20-DMA, approximately at 45400. If Banknifty manages to break above this level, it could trigger short-covering and potentially lead to further gains. However, if it fails to break the 20-DMA, there's a possibility of the index falling towards the 43300 level.

Lastly, Mishra added, "On the benchmark front, Nifty has slipped below the support of short term moving average i.e. 20 EMA after five months and also breached the trend line indicating the loss of momentum now. We expect Nifty to consolidate in a broader range ahead wherein 19,100-19,300 would offer support in case of further decline while a rebound towards the 19,650-19,850 zone would attract profit-taking again. Since we are seeing a mixed trend across sectors, the focus should be on stocks that are showing relatively higher strength and maintain strict risk management citing intermediate volatility."

Disclaimer

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