As ‘Bullish Engulfing’ forms on Nifty charts, index band seen at 11330-11550

In the last short week, Nifty rose for the fourth consecutive week gaining 41 points to close at new peak of 11471 on the back of strong earning season and ignored the weakening rupee. The midcap index also gained 1.60% and Bank Nifty closed almost unchanged with mixed trend in public sector and private banks. Among sectors, pharma gained the most 6%, IT and FMCG gained 3% while energy, infra and metals lost 1% each. The foreign portfolio investors sold equities worth Rs 2,000 crore while domestic institutional investors bought stocks worth Rs 893 crore.

In the last week highlights, global markets faced volatility in earlier part of the week, but settled and regained on peace talk between US and China over trade war. The rupee slumped to fresh record low of 70.32 and settled at 70.16 over the risk of contagion from Turkey’s financial market turmoil. India’s forex reserves fell to $401 billion from $426 billion in April and trade deficit for July rose to five-year higher at $18 billion. Retail inflation dropped to nine month low of 4.17% in July on the back of softening food prices. Brent crude remained stable at $72 per barrel on increasing US inventory.

In the concluding earnings season, Sun Pharma surprised the Street with strong numbers and was the biggest gainers with 12.5% jump, leading to a rally in the pharma stable. Consumption sector stocks Britannia, Hindustan Unilever, Dabur, UBL hit their life highs.

In the key global events this week, the US and China Peace talk on Tuesday, US Federal Open Market Committee (FOMC) meeting minutes (Wednesday), US and Euro Flash Manufacturing and Services PMI and three-day meeting of central bankers meeting at Jackson Hole will begin on Thursday. Indian markets are closed on Wednesday.

Post earnings season, markets will focus on the outcome of the trade war peace talk between the US and China, which will set the tone for the next markets move. Nifty may remain in the narrow range consolidation while PSU banks, NBFC and pharma stocks could remain in favour this week.

On the weekly charts, Nifty has made ‘Bullish engulfing’ pattern which indicates bulls are having grip on the markets.

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Last week projection of 11500 on the higher side was unaffected. For the week, Nifty supports are at 11430 and 11330 while resistance is at 10560 and 10630. Probable trading range could be between 11330 and 11550.

By Yogesh Vinod Mehta 

(The writer is VP-Retail Research, Motilal Oswal Securities Ltd)

Source: DNA Money