Sensex, Nifty snap 5-week losing streak; has the market hit bottom?

Benchmark equity indices BSE Sensex and NSE Nifty snapped their five-week losing streak with a rally of around 3 per cent. Market watchers believe that low-level buying in beaten-down stocks supported the domestic equity market for the week ended May 20.  

The 30-share BSE Sensex soared nearly 1,533 points to 54,326.39 during the past five trading sessions, while the 50-share NSE Nifty index added 484 points to 16,266.

Overall, heavy buying on Friday mainly helped markets to end the week with a gain of 3 per cent. Commenting on the May 20 session, Vinod Nair, head of research at Geojit Financial Services said, “The market displayed a confident yet calm rally throughout the day, supported by fortified global markets, especially the Asian market. The Chinese central bank cut a key interest rate to support growth, injecting optimism into emerging markets.”

“With concerns over an economic slowdown and rate hikes across the globe, investors will continue to invest with caution. Value stocks should do well during this consolidation period,” Nair added.

With a gain of nearly 11 per cent, Eicher Motors emerged as the top gainer in the 50-share index. It was followed by Hindalco Industries (up 10.31 per cent), Coal India (up 10.20 per cent), Adani Ports and Special Economic Zone (up 9.31 per cent) and Reliance Industries (up 8.33 per cent). ITC, Dr Reddy’s Lab, Maruti Suzuki, Tata Steel and Axis Bank also rallied over 5 per cent each.

On the other hand, Tech Mahindra, TCS, Infosys, Power Grid, HCL Technologies and Shree Cement declined between 2 per cent and 6 per cent during the week gone by.

The market is likely to stay volatile in the forthcoming week with the scheduled F&O series expiry on May 26 and traders balancing their positions going ahead for the next series. Meanwhile, the trend in investment by foreign institutional investors and the movement of the rupee against the dollar will also be closely watched by the market participants.

The Foreign Exchange Reserves data will also be announced on May 27. Foreign Exchange Reserves in India decreased to $595,950 million in May 6 from $597,730 million in the previous week.

In the ongoing result season, traders will be eyeing the earnings of prominent companies, including Data Patterns (India), Divi’s Laboratories, Ramco Cements, SAIL, Thomas Cook (India), Zomato, Adani Ports, Bank of India, Birla Cable, Grasim Industries, Latent View Analytics, RailTel, Rites, Zee Media, Coal India, Fortis Healthcare, Motherson Sumi Systems, Page Industries, Zee Entertainment, Gail (India), Glenmark Pharmaceuticals, JSW Steel, Karnataka Bank, Info Edge (India), Nykaa and Oil India, among others.

Has the market hit bottom?

Yesha Shah, head of equity research, Samco Securities believes that the market has not reached its bottom since price patterns on the Nifty show that the uptrend has been significantly harmed.

“Similarly, a Head and Shoulder breakdown has been seen on the weekly chart of the S&P 500 index. Having said this, a short-term rebound cannot be ruled out and at this point, it is unclear if the bounce will be a relief rally or the start of a fresh bullish surge. Taking all of this into account, we recommend that traders keep a cautiously bullish stance for the coming week as long as the Nifty does not break below 15,700 levels,” Shah added.

Subash Gangadharan, senior technical and derivative analyst, HDFC Securities said, “The daily timeframe of the Nifty indicates that the index has made a double bottom around the 15,735 levels and rallied sharply on Friday. A move above the recent swing high of 16,400 could lead to further upsides in the coming week.”

“While we remain open to further pullback rallies in the very near term, we must remember that the intermediate trend remains down. The bears would gain more control once the recent intermediate low of 15,735 is broken. Till then enjoy the rally till it lasts,” he added.

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