The Week Ahead: Re-emergence of Foreign Flows Takes Indices to Unchartered Territory

The week ahead should see the indices head higher albeit at a slower pace as re-emergence of foreign flows took the Nifty and Sensex into unchartered territory. The market is clearly seeing extreme short-term momentum and a scramble for stocks driving indices higher. With the Reserve Bank of India (RBI) leaving the repo rate unchanged and cutting the statutory liquidity ratio (SLR) by 50 bps, or 0.5 per cent, it spurred action into the markets. This will not only provide commercial banks some room for lending but also improve their margin and overall profitability. The RBI also remains committed towards maintaining adequate liquidity in the banking system. The other positive sentiment boosters were reports stating that the Indian Meteorological Department found that conditions turned favourable for the onset of monsoon in India. Market participants would look forward to the April IIP (index of industrial production) data and May CPI (consumer price index) data which are scheduled to be released on June 12. Developments on the political front will also be closely watched as Finance Minister Arun Jaitley has started his budget-making exercise. Global markets were also on-a roll with the Dow Jones and S&P 500 hitting new highs. Foreign buying throughout the week has again seen the money on the side-lines chase stock. The same should continue as ETF (exchange traded fund) flows chase new highs and the rupee stabilising around 59 is also improving sentiment greatly. Nifty gave a breakout from range-bound activity of last three weeks. The Bank Nifty is also on the verge of breaking out the resistance of 15500 which is likely to provide fresh ammunition to the index in the coming week. Friday's up move has reinforced positive momentum and going forward rally has good potential to test levels of 8000. The Nifty ended the week with gains of 4.88 per cent, while the high beta Bank Nifty ended the week with gains of 5.06 per cent. The star of the week was CNX Energy, which clocked up gains of 9.58 per cent, while the star loser was the CNX IT, which ended the week down 0.27 per cent. Another positive was the fall in bond yields on the 10-year government paper which traded around 8.3 per cent. This was the main reason for the renewed thrust in PSU banks which as a corollary to the above would see big treasury gains. Oil and gold prices continued to see range-bound price movement with a slightly negative bias. The top 3 gainers on the Nifty were: ONGC, up 23.1 per cent, BPCL, up 20.3 per cent, and Tata Steel, up 18 per cent. The top 3 losers were: HCL Tech, down 6.4 per cent, Dr Reddy's Laboratories, down 4.3 per cent, and TCS, down 2.7 per cent. With slowly improving economic indicators, the markets are now pricing in positive action from the government and the expectation of reforms. Also, a growth-oriented budget is next on the agenda for corporate India. Markets may look over stretched in the short term and ripe for correction but seeing the positive change of sentiment any correction should be used as a buying opportunity as markets to head higher till the Union Budget in July. Sanjeev Bhasin is an independent market analyst. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

The Week Ahead: Re-emergence of Foreign Flows Takes Indices to Unchartered Territory

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