Nifty needs to close decisively above 15200 to start a fresh bullish up move, Samco Securities' Nirali Shah says

Nirali Shah, Head of Equity Research, Samco Securities says that Indian benchmark indices had nothing short of an erratic week following WPI inflation numbers, which hit their 11-year high at 10.49% for April. While higher inflation is disturbing the Street, its near-term impact was outweighed by the declining COVID-19 cases in India. In the past 12M it has garnered the highest FPI equity inflows of over Rs. 36,618 Crs (as of April 30).

While inflation has taken centre stage across broader markets, fuelled in part by the rising commodity prices, the result season has shed light on another perspective. India is amidst a demand-pull scenario which is driving earnings and re-rating stocks. Consumption in the discretionary space has seen a drastic decline because despite liquidity, the common man continues to prioritize his spending towards essentials.

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This excess money seems to have been diverted towards gold to an extent as it continues to gain traction as an inflation hedge. 

Event of the Week: Government’s ambitious strategic divestment plans of Rs. 1.75 trillion for FY22 has temporarily been derailed on account of the second wave. From due diligence processes for Air India and BPCL to divestment of SCI and BEML, to partial stake sale in LIC through an OFS, the
timetable of scheduled activities has been unwillingly delayed. Government managed to sell a majority part of SUUTI’s remaining stake in Axis Bank via OFS which might garner close to Rs. 4000 Crs. 

Technical Outlook on Markets: Nifty50 index closed the week on a positive note and crossed the previous short term resistance of 15050. Although it is trading very close to its all-time highs but it is still below the rising channel and has not given any directional move to break it yet. Nifty needs to close decisively above 15200 to start a fresh bullish upward move within the channel. As long as it does not take a decisive direction, we maintain a sideways to mild bullish outlook. 

Expectations for the Week: Given that global macros have been finding a grip amidst the pandemic, domestic benchmark indices may continue to dilly-dally in the near term. Adding to this, the Fed indicated that they would discuss scaling back on the massive asset purchase program if the current recovery pace continued. With a hint towards liquidity tapering, bond markets continued to witness sell-offs and going forward if there is lower buying support from the Fed, the impact would be clearly visible in price moves. Turnaround in results can keep
the Street going at least for a couple of weeks more. Nifty50 closed the week at 15175.30, up by 3.39%.