Market experts suggested that red hot US inflation data led to another round of aggressive rate hikes and muted corporate earnings from India Inc in June 2022 quarter are denting the sentiments for equity markets.
Other factors like weaker rupee, mounting inflationary pressure at home and looming fears of the inflation are also hurting the sentiments for indices, capping the gaining opportunities.
Viraj Vyas, Technical and Derivatives Analyst, Ashika Group said that the Index has been in a time and price correction mode since October 2021 coupled with the fact that FIIs have stayed resilient in their selling.
The Nifty Bank is critical as its constituent have about one third weightage in the Nifty50 Index. However, banking stocks led the rally in the first week of July which was latter affected by sectoral rotation, as said by analysts.
Technically, the index did face pressure at the 200 DMA, where the profit booking move commenced, said Vyas. “Going forward, it remains imperative to stage a follow-through move above 35,200-35,400 to gain further bullish momentum.”
On the other hand, second rung stocks outperformed their larger peers. Midcap and smallcap indices were able to settle in green but experts are more positive on the midcap names, considering the volatility in the markets.
The rally in the index was mainly led by Auto, Industrials and Consumption stocks and continued outperformance in these stocks is likely to add more steam to the rally, the tech expert from Ashika Group said.
Coming to the sectoral churn, Nifty IT index plunged more than 6 per cent during the week to hit its new 52-week low. However, sharp corrections have made some large and midcap IT counters attractive for the investors.
Vyas said that looking at the Weekly chart, the Index has been attempting to form a base at the 26,000-26,500 zone but a violation of this area is likely to drive the Index lower towards the 25,200-25,500 zone.
Pullbacks are likely and as the result season progresses, stocks with positive management commentary on margins and attrition are likely to see tailwinds, he added.
Sector rotation supports the power, energy and utility counters, which gained the most during the week. However, the sustained outperformance from the counters is not likely on the cards.
Investors might park their money here because utilities are generally a defensive bet during periods of market decline, suggest Vyas. “On a side note, FMCG and Pharma are other defensive bets, and are better placed than energy stocks.”
Key support level for the Nifty Index is seen at 15,700-level while resistance on the upside is seen at 16,300-level, he said. “A buy on dips strategy will work as long as the Index continues to sustain above 15,700-level on the Nifty.”
