Chart pattern indicates that USD/INR is likely to extend its upward move towards 71-71.80 in the near/short term, Rajesh Palviya of Axis Securities said.
The S&P BSE Sensex reclaimed 38,000 again on Monday to hit a fresh record high of 38,266.95, while Nifty50 climbed mount 11,500 for the first time to hit a life high of 11,545.30 in morning trade.
Strong global cues and positive momentum in Asian markets led the rally. Index heavyweights such as L&T, ONGC, Tata Motors also fulled the rally in Nifty.
We have collated a list of top 5 factors which could be aiding rally on Indian markets:
Trade war fears ease:
related news
Markets across the globe took a sigh of relief after reports suggested that China and the United States will hold lower-level trade talks this month, offering hope that they might resolve an escalating tariff war.
Reports suggested the talks in Washington would take place on August 21 and 22, just before USD 16-billion in new US tariffs on Chinese goods take effect.
Rupee recovers against the USD:
After closing above Rs 70/USD on Friday, the rupee recovered on Monday. It has opened strong at 69.83 per dollar, a gain of 32 paise versus previous close 70.15.
USD/INR managed to give a breakout of last seven consolidation range 68.40-69.40 and formed a bullish gap area on the weekly chart.
“Chart pattern indicates that USD/INR is likely to extend its upward move towards 71-71.80 in the near/short term,” Rajesh Palviya, Head - Technical & Derivatives Analyst, Axis Securities told Moneycontrol.
“On the lower side 70-69.50 are likely to act as support for minor corrective action. Our preferred strategy would be to buy on dips till USD/INR is trading above 69.30 levels,” he said.
FPIs make a comeback:
Foreign investors have pumped in over Rs 7,500 crore into the Indian capital markets so far in August on better corporate earnings coupled with improvement in crude oil prices.
The latest inflow comes following a net infusion of over Rs 2,300 crore in the capital markets, both equity and debt, last month. Prior to that, overseas investors had pulled out over Rs 61,000 crore during April-June, said a PTI report.
According to the latest depository data, foreign portfolio investors (FPIs) pumped in Rs 2,409 crore into equities and Rs 5,168 crore into the debt market during August 1-17, taking the total to Rs 7,577 crore.
June quarter earnings remain strong:
India Inc. has ended the last leg of its earnings season for the quarter ended June 2018. Although some interesting trends were observed during the course of the earning-report season, but the underlying narrative stays the same - a healthy performance from the Consumption- and Commodity-oriented sectors marred by higher provisioning costs at Corporate Banks.
“Aggregate sales and EBITDA growth was healthy and in-line, profits missed our estimates. The miss at the PAT level for both the MOSL and Nifty Universe can be entirely ascribed to Corporate Banks, which were impacted by elevated provisions. Strong inventory gains in OMCs boosted the aggregate profits,” Motilal Oswal said in a report.
As many as 90 companies saw earnings cut of 3 percent+ (78 in Q4FY18), while 39 companies saw earnings upgrades of 3 percent+ (53 in Q4FY18).
The brokerage firms FY19/20 Nifty EPS estimates have been cut by 5.6 percent/1 percent to Rs 547/688 against Rs 580/694 earlier. “Nearly 80 percent of the FY19 Nifty earnings cut is driven by ICICI, SBI and Tata Motors. We are building in 19/26 percent EPS growth for Nifty for FY19/20,” said the report.
Technical Factors:
The Nifty50 climbed 11,495 to hit a fresh record high above 11,500 for the first time. The index hit a record high of 11,545.30 and now the next resistance level is placed at 11,600 levels.
Chart patterns suggest that if Nifty crosses and sustains above 11,500 levels, it would witness buying which would lead the index towards 11,600-11,650 levels.
The Nifty50 is trading above 20, 50 and 100-day SMA's which is an important short-term moving average, indicating positive bias in the short term.
“The Nifty continues to remain in an uptrend in the medium-term, so buying on dips continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 11,600-11,300 with a positive bias,” said Palviya of Axis Securities.
“The weekly strength indicator RSI continues to remain flat above its reference line indicating a positive bias. However, momentum oscillator Stochastic has turned negative from the overbought zone indicating a possible consolidation or a down move in the near term,” he said.