Dalal Street Corner: Ahead of RBI MPC meet, market ends with 1.5% gain this week; what should investors do on Monday?

Even though the benchmark indices closed with modest losses despite trading higher during majority part of Friday's session, the domestic equity market closed highly volatile week by nearly one and half per cent gains. Headline indices Nifty50 and Sensex closed higher by 1.4% and 1.6% respectively in the week ended June 3, 2022.  

Realty, Energy and IT stocks saw good buying interest throughout the week, as Nifty Realty and IT indices gained 4.9% and 4.4% respectively, while BSE Energy ended with 3.7% gains during the 5-day trading in the week gone by. BSE Power declined the most by 4.5%, while Nifty healthcare and pharma were top losers on NSE with 2.5% and 2% cuts during the week under question.  

Meanwhile, Nifty50 and Sensex closed 0.26% and 0.09% lower on Friday as the former slipped below 16,600 and the latter ended marginally lower by 49 points.  

Initially, the benchmarks witnessed a stellar rally due to recovery in global markets, cool off in the dollar index and US bond yields, the resilience of the Indian economy, and continuous support from the domestic investors, however, concerns related to RBI policy and anticipated rate hike by Federal Reserves in the US spooked the market.  

Here is what experts make of the current trend in the market: 

Vinod Nair, Head of Research at Geojit Financial Services 

The late sell-off indicates the lack of confidence in the domestic market driven by the concerns over Central Bank policy. While in the global market, the investors were waiting for the release of US job data.  

The RBI is expected to hike rates by 25bps to 35bps and the Fed by 50bps, but the outlook & changes in the economic growth and inflation will determine the market trend. If the central banks decide on a stringent policy tightening, the market mood can swing bearish. 

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas 

The Nifty started the session on a strong footing on June 03, however, couldn’t gather follow through momentum. It crossed the barrier of 16700 with a gap up opening but stumbled near the daily upper Bollinger Band, which was near 16800. As a result, the index couldn’t sustain in the higher territory & moved back towards the key hourly moving averages.  

Nevertheless, it continues with higher top higher bottom formation on the daily chart. Also, the index is still trading above its short-term support zone. Thus, we maintain our short-term positive stance with reversal below 16400 on a closing basis.  

On the higher side, 16800 & 17000 will be the short-term targets to watch out for. 

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities. 

The Bank Nifty index formed a bearish engulfing candle on the last of the week, indicating a stiff resistance on the upside at the 36,000 level. The bears took over the market and the index ended at a day's low.  

The lower-end support zone stands at 35,000-34,800 levels and if fails to hold this level will trigger further selling pressure. 

Santosh Meena, Head of Research, Swastika Investmart Ltd 

The Nifty and Sensex witnessed a stellar rally from the 15700/52500 levels respectively, thanks to the recovery in global markets, cool off in the dollar index, and US bond yields, the resilience of the Indian economy, and continuous support from the domestic investors, however, it is still a counter-trend rally, where 16800-17000 is an immediate resistance area, above this, we can expect a move towards 17500/17800 levels in Nifty.  

On the downside, 16400 has become near term base and till then we can say bulls will have control over the market while below 16400, there will be a risk of further correction. There are still some uncertainties about global markets but there are some pockets that may continue to outperform.  

Investors are advised to stay invested in quality stocks while the current rally is an opportunity to exit stocks that have fundamental concerns. We are bullish on corporate facing banks, capital goods, infra, and housing sector.