IMD forecast: Monsoon outlook powers Nifty, but volatility on way

The broader index Nifty closed positive for the fourth straight week and gained 0.80% to end at 10564, backed by Indian Meteorological Department (IMD) forecast of normal monsoon at 97% for this season.Though the mid and small-cap indices surged 1.17% and 1.43%, respectively, Nifty Bank underperformed losing 1% led by the PSU Banks which lost 4.83% whereas private banks lost 1%.

The Information Technology (IT), FMCG and Metal sectors outperformed gaining between 4-5% taking cues from the strong rally in base metal prices on LME. Tata Consultancy Services (TCS) results and guidance were above street expectations and it became India’s first company with a market capitalisation of Rs 6.5 lakh crore.

Markets continued its rally in the last week ignoring the noises like the weakening of the rupee, rising bond yields and spurt in base metal prices.

The rupee slipped to 66.10/$, the lowest level since March 2017, after the minutes of the last meeting of the Monetary Policy Committee (MPC) indicated that the central bank may shift to a hawkish monetary stance in its meeting in June, which led to a spike in Indian bond yields to 7.71%.

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The International Monetary Fund (IMF) expects India’s economy to grow at 7.4% in FY18 and 7.8% in FY19 on strong private consumption, besides suggesting that structural reforms will gradually raise productivity and incentivise private investment.

In the current week, Indian markets are expected to face volatility ahead of the April month’s Future and Options (F&O) series expiry on Thursday.

On the other hand, sentiment may remain positive on Donald Trump’s statement on the artificial rise in international crude price and the start of peace talks between the US and North Korea.

Technically, Nifty has strong resistance at 10630-10650 levels and rally may continue if the benchmark index closes above 10650.

But, if it fails to surpass then it may see the time correction, with supports seen at 10460-10330, respectively. The probable trading range for the week could be between 10650-10330.

FIIs sold equities worth Rs 2,821 crore while DIIs bought shares worth Rs 2,124 crore in the previous week.

By, Yogesh Vinod Mehta
(The writer is VP- Retail Research, Motilal Oswal Securities Ltd)

Source: DNA Money