It’s been a good run for Indian stocks as traders make the most of a friendly macro environment. You have the Sensex heaving over 500 points and the Nifty breaking 24,150, with the impetus coming from lower oil, a thaw in West Asia and a solid IT recovery. Some of that early Friday strength is down to the US jobs numbers putting the brakes on any talk of a Fed rate hike.
Markets surge as crude eases and IT rebounds
The BSE Sensex was at 77,503.99 as of 2:41 pm, a 581.35-point or 0.76% gain. Over on the Nifty 50, it was 0.72% higher at 24,178.20. Breadth was healthy across the board; only FMCG was left behind among the big sectoral indices.
Then there are the IT names. After four days of being in the red, they have taken charge of the rally. The Nifty IT index was up well over 3% on the day. Infosys was up close to 4%, HCLTech in the 3% range and TCS around 2.6%.
You could see the same kind of follow-through when the openers came in on Friday. At 9:15 IST the Nifty 50 had 0.83% in it at 24,375.65 and the Sensex was 0.84% better at 78,152.34. All but one of the 16 sectoral indices were in the plus column, with the mid and small cap Nifties chipping in 0.4% and 0.5%.
The three drivers right now
A few things have come together to put risk-on back in the equation for equities:
– Brent is at $70.79, off 1% and at a four-month low.
Talks in West Asia are moving along; we’ll see the next round on July 9.
Nifty IT has put on 3%+, with the heavy hitters in front.
Oil has been in a three-day slide and is at its lowest in a while. Between the OPEC+ option to ramp up output in August and the easing of tensions, the price has given way. For an importer like India, that means less inflation and a better trade balance.
Some word out of Qatar on indirect Iran-US talks concerning the Strait of Hormuz has also put minds at ease about supply. It’s a key route for oil, so when things are quiet there, you can count on the market to be in better spirits.
Technical picture: key Nifty levels
Rajesh Palviya, SVP of Technical and Derivatives Research at Axis Securities, says the Nifty’s recapture of 24,000 has put the momentum where it should be. Palviya sees a few things underpinning the bullish mood: better market breadth, a softening in crude, inflation concerns on the wane, and steady institutional money.
From a technical standpoint, he says the index is in good shape so long as it doesn’t slip below 24,000. Should we see a firm move past 24,300, you could be looking at a run-up to 24,450-24,600. If there’s any pullback, buyers should be waiting in the 23,900-24,050 area. He does put in a word of warning, though: with some jitters in global tech and the Fed’s next moves still an open question, investors are being careful.
Stocks Palviya has in his sights
Five-Star Business Finance (Cmp: Rs 541):
We’ve had a clean break above the 529 resistance. The weekly chart shows a volume-backed breakout of a year-long downtrend at 491. It’s running over its 20-, 50-, 100- and 200-day SMAs. We’re looking for 585-610 on the upside; 525-515 for support.
Apollo Tyres:
A heavy-volume, inverse Head & Shoulder pattern was put in place at 446, a clear sign of a trend change. You can see higher tops and bottoms, and the RSI is in the green on both the daily and weekly. It’s holding up well above the 20-, 50- and 100-day moving averages. Target is 485-500, with a floor at 448-440.
Exide Industries:
The charts are in your favour here, with the stock making higher highs and lows. A flag pattern broke at 412 on strong volume, and the Bollinger Bands are giving buy signals. It’s also above all the key SMAs. 445-460 is where we see it going, with 410-400 as the line in the sand.
What the world is telling us
The US didn’t add as many jobs in June as we thought, and they have been downgrading the last couple of months’ figures. That has put the brakes on talk of a Fed hike anytime soon. When US rates are lower, it’s usually good for emerging markets like India and for the kind of business spending that Indian IT relies on.
You could see that on Friday when the Nifty IT opened 1.9% in the black. After some losses of late, the sector put in a quick recovery and was one of the main engines of the day’s rally.
What to keep an eye on
There are two big ones for Indian equities right now. One is where crude is headed with OPEC+ mulling a production hike in August. The other is in West Asia; we have Iran-US talks coming up on July 9.
Then there is the Fed story in the wake of the softer numbers from across the pond. For the moment, between the calmer oil, less geopolitical noise and some IT buying, the odds are with the bulls. Palviya’s index levels give you a sense of where to go from here.
*These are the analyst’s own views. Do your due diligence with a professional before you put your money to work.*
