Indian markets are likely to open on a positive note, buoyed by a strong recovery in global markets. Analysts expect the snakes-and-ladders game to continue in the stock markets. With the earnings season almost over and the RBI’s monetary policy over, the market is waiting for fresh impetus to continue until the domestic markets follow the global markets.
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Emkay Global said in a note that India’s strong balance sheet and unhindered growth prospects make the country resilient to the current global uncertainty. “The high valuations could, however, trigger a short-term correction, but this would be an entry opportunity. From a 2-3 year perspective, we remain bullish on Indian equities. Manufacturing/SMIDs continue to outperform, albeit to a lesser extent, with more aggressive bouts of sector rotation.”
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A Gift Nifty of 24,350 suggests a strong gain of about 200 points as Nifty futures for August closed at 24,136 on Thursday.
“Some of our fears have come to fruition without much impact on the market,” he added. “Going forward, global risk aversion, political instability and regulatory risks are the main concerns that could trigger a short-term sell-off. If a correction does occur, we would view it as an entry point for longer-term investors. The best places to hide from a potential correction are IT and FMCG, despite the elevated valuations – these sectors would correct less than manufacturing and cyclical sectors.”
The Reserve Bank’s stance on the status quo is in line with expectations, analysts said.
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, said RBI appears confident but cautious.
“The recently decided monetary policy was a non-event as the RBI kept rates unchanged. Inflation is declining but still above the comfort level of 4%. The benefit of high base effect will not be available in the coming quarter. Amid all this, the RBI has decided to maintain a wait-and-see approach, which we believe is the right thing to do. The US Federal Reserve is expected to cut rates next month and many central bankers are likely to follow suit. But the RBI has made it clear that it will give utmost importance to local conditions before deciding on rate cuts. Hence, the continuation of its withdrawal of easing policy is to be welcomed. Markets have also reacted positively as there are no major surprises,” she added.
Technically, Nifty is stuck in a range, experts said. According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, after an uptrend on Wednesday, Nifty failed to clear the crucial hurdle of 24,350 points and slipped into weakness on Thursday, closing the day down 180 points. After a weak opening, the market continued in a negative trend amid range-bound moves for most of the session. The interim uptrend during the day was unsuccessful and Nifty eventually closed near the lows.
“On the daily chart, a decent negative candle with upper shadow has formed, which is in a high-low range of 24,350-24,000 levels. The crucial hurdle of the opening down gap of August 5 is still intact, the market has not been able to break the lower end of this down gap around 24,350 levels on the upside.”
According to him, Nifty’s short-term trend remains choppy. “The absence of an upside move and the presence of strong resistance from above suggest further consolidation or weakness in the near term. A fall below 23,900 could start another round of downside correction. However, a decisive rise above 24,350 could bring the bulls back into action,” he warned.
Meanwhile, stock markets across the Asia-Pacific region opened strongly, with most gains of between 0.75 and 2.75 percent.
