Gold, Rupee and Equity Markets Outlook details explained by ICICI Securities
Gold prices started Tuesdays trade on a strong note opening higher with a gap and rose further during the first half of the session till a high of Rs 47480. However, prices did not sustain at higher levels and fell sharply during the remaining session till a low of Rs 46682. Prices fell sharply in the last session as the US dollar bounced off three-week lows on bullish comments from a US Federal Reserve official and upbeat manufacturing data helped arouse investor risk appetite.
Gold prices started Tuesday’s trade on a strong note opening higher with a gap and rose further during the first half of the session till a high of Rs 47480. However, prices did not sustain at higher levels and fell sharply during the remaining session till a low of Rs 46682. Prices fell sharply in the last session as the US dollar bounced off three-week lows on bullish comments from a US Federal Reserve official and upbeat manufacturing data helped arouse investor risk appetite. Overall, ICICI Securities expect gold prices to consolidate near immediate support of Rs 46600 level in the short-term.
The US$INR future witnessed marginal bounce whereas spot ended flat. Elevated crude oil prices and Dollar index above 90.5 helped the pair to gain 11 paise. However, upsides seem limited. The dollar-rupee February contract on the NSE was at | 72.79 in the last session. The open interest declined almost 8% in the February series. Intra-day strategy is to Sell US$INR in the range of 72.90-72.92.
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The Nifty started Tuesday’s session with a positive gap and scaled a fresh all-time high of 15432. However, profit booking from higher levels led the index to retest previous session’s low (15243) yet the Nifty managed to end above 15300. As a result, the index formed a high wave candle, indicating elevated volatility at higher levels. The Nifty has approached in the vicinity of ICICI Securities earmarked target of 15500 amid overbought conditions of weekly stochastic oscillator (placed at 93).
Hence, ICICI Securities expect momentum to slow down after a sharp post Budget rally of 13%. In the process, stock specific activity would prevail as we approach the fag end of the Q3FY21 result season. We believe any temporary breather from here on would make the market healthy and pave the way towards 15500 in coming weeks as it is 161.8% external retracement of last fall (14754-13596), at 15466. Therefore, any dip from here on should not be treated as negative. Instead, it should be capitalised on as a buying opportunity in quality large cap, midcaps.
Nifty midcap index maintained its record setting spree and continued to outperform the benchmark, on expected lines. In the process, it maintained its strong positive correlation with developed market peers as broader market indices of developed peers have been resilient with the US index hitting fresh life-time high. ICICI Securities expect Nifty small cap index to witness catch up activity from here on as they are still 18% away from life-time highs.
ICICI Securities believes any temporary cool off from here on would find its feet around 14900 as we expect elevated buying demand to emerge at key support of 14900, as it is confluence of 50% retracement of post Budget rally (14470-15432), at 14950 coincided with last week’s low of 14977.
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