Watch out for govt’s stimulus package

Indian equity markets ended marginally lower this week due to the absence of any stimulus announcement from the government and weak global cues. It however still managed to close above 11,000-mark.

While concerns over the country’s economic slowdown, weak earnings, and global trade war continue to impact markets, sentiments again turned positive with the hope that the government may soon announce measures to revive the economy with stimulus measures. Broader index Nifty 50 closed at 11,048, while the 30-share Sensex closed at 37,350, both down 0.6%.

Similar volatility was witnessed in broader markets with both the NSE mid and small-cap Indices declining by 0.8% and 0.6% respectively. On the sector front, all the sectors closed in red except Media (+1.4%), Metals (+0.2%) and PSU Banks (+0.3%). While IT and Healthcare were down 3%, Auto, Financial Services and FMCG were down 1-2%. FIIs turned net buyers this week and bought equities more than Rs 1,000 crores during the week. Domestic institutional investor (DIIs) bought equities more than Rs 2,000 crores during the week.

Prime Minister Narendra Modi held a meeting with FM this week to review the state of the economy and find a solution to stimulate growth. Further July Wholesale Price Index (WPI) reported at a two-year low of 1.08% raised hopes of another rate in the October RBI policy meeting. Even monsoon recovered with rain deficit narrowing.

Going forward, the market would be keenly awaiting prompt and effective actions from the government to take further cues. Earnings season has come to an end, thus focus would shift to domestic and global macro developments. The trend in global markets, progress on US-China trade war, global bond yields, crude oil price, and currency movement would continue to drive sentiments.

Technically, Nifty managed to recover from lower levels and extended its move towards 11,070 levels. It formed a Long Legged Doji on a daily scale while a Hammer Pattern on the weekly scale which suggests buying is visible at lower levels while at the same time follow up is missing at the upper band of the falling channel.

It has been consolidating in between 10,900 to 11,180 zones from past few trading sessions and now requires a decisive hold above 11,111 to extend its gains towards 11,150 then 11,200 zones while on the downside supports are seen at 10,950 then 108,80 levels.

(The writer is the Head of Retail Research at MOFSL)