The markets are expected to be more volatile with the derivatives rolling into expiry this Thursday. Last week the markets cheered the FOMC’s decision to postpone the interest rate hike to a ‘considerable period of time’. There was fear among the investors that FOMC may give hints about probable interest rate hike. Thursday’s rally was a result of markets cheering this news. The sensex and the nifty hit intra week low of 26,511 and 7,925 and resumed the upward movement on Thursday , finally closing at 27,090 and 8,121 – a gain of just 0.10 % and 0.20% after swinging almost 2% mid week.
With the FOMC meeting out of the way, there are no major economic events to unfold this week. The events that may cause market movements include -
- Expiry of September derivatives
- Movement of dollar rates
- Gold prices (which is expected to come down) and
- PM’s visit to US
After hitting intra week highs of 27,355 and 8,180 the market indices seemed to pause and moved sideways for the remaining days. The sensex and the nifty ended the week with a 0.13% and 0.23% gain which shows that the movement in large cap stocks were slowing down. At the same time, the CNX Mid cap and BSE Small cap indices has outperformed the benchmark indices by 4-5% which proves that the retail investor activity is more robust in midcap and small cap segments. It is better for Investors to be cautious at this stage because this scenario usually occurs when the markets are overheated. A correction at this point of time can bring the markets down faster. In the derivatives segment , the value of open interest positions have crossed 2 lakhs crores and the put –call ratio stands close to 1. This means that speculative interests are high and at the same time speculators are equally divided over the future direction of the market.
Last week witnessed the sensex and the Nifty finishing the week with all time highs. The BSE sensex closed at 26,638 and the NSE Nifty closed at 7,954. It was the fourth consecutive monthly gain recorded by the markets.
Going ahead, it is reasonably expected that the GDP numbers which are at a two and a half year high at 5.7% for April –June quarter will give a positive start on Monday. Power, mining and metal stocks may witness volatile sessions since investors will be reacting to the supreme court’s verdict on coal blocks allocation. Another interesting factor to track is the Nifty’s movement towards 8,000 mark and the probable reaction of the market. It will be interesting to see of the investors will go on a buying spree and push the index further or will let the fear factor enter and pull the index down.
Post Independence Day speech, the markets have regained the momentum it lost a few weeks back. The Sensex gained 316 points and the Nifty gained 121 points to close at 26,419 and 7,913 respectively. The activity in the derivate segment of NSE is also at high levels with an open interest of 2.22 lakh crore. It seems that the markets have ignored data like increase in inflation rates and drop in industrial output and is going ahead on hopes that the PM will be able to take Indian economy towards higher growth and lower deficit in future.
Going ahead, the volume of FII inflows , global news , Crude oil prices and progress of monsoon will be key in deciding the near term direction. The drop in crude oil prices and upward break in bank nifty has propelled the indices to higher levels last week. Sustained rally in both these sectors may push the nifty towards 8000 mark in the coming sessions. The put-call ratio stands at 1 which suggests that speculators are equally divided in opinion at this point of time. This may give rise to volatile sessions this week as the derivative contracts roll to expiry this Thursday.
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