Nifty may near 9850; Bulls likely to remain ferocious

The Reserve Bank of India (RBI) in its monetary policy review meeting, kept the rates unchanged at 6.25% with a neutral stance ahead of monsoon with revised 2017-18 growth projection at 7.30% from 7.40% earlier.

However, a cut of 50 basis points (bps) in the Statutory Liquidity Ratio (SLR) to 20% and weighed down risk weight for housing loan which will be positive for banks.

The goods and services tax (GST) for various remaining small sectors was fixed with gold jewellery at 3% and premium biscuits and footwear at 18%.

The European Central Bank (ECB) kept interest rates unchanged and continued the stimulus. In UK general elections, no party could claim majority in the house which may delay the Brexit process

Foreign institutional investors (FIIs) turned net buyers to the tune of Rs 601 crore in this week and domestic institutional investors (DIIs) also bought worth Rs 883 crore.

The Nifty continued to remain in consolidation mode, moving in a narrow 101 points range throughout the week and managed to close 15 points higher at 9668 for a 0.15% gain week on week.

The rise was measured and cautious, each day’s rise being corrected on the following day. Pharma and metal sectors led from the front adding about 2.50% each.

The US Federal Open Market Committee statement on Wednesday and Bank of Japan Policy meeting on Friday, are the key global events this week.

The finance minister’s review of  public sector banks’ performance for NPAs, industrial production for April and consumer price inflation, wholesale price index, balance of trade for the May, are expected events in India this week and will be keenly watched. Oil marketing companies have decided to revise the price of petrol and diesel on a daily basis which is currently being revised on a fortnightly basis.  Additionally, Wipro and Muthoot Capital have record date for bonus this week.

Crude prices softened 4% at estimated $48 per barrel as US increased oil production which is favourable for Indian economy. Strong domestic liquidity, continuous FII buying, better-than-expected performance of corporate earnings in Q4FY17, progress on GST implementation from July 1, and the prediction of a normal monsoon at 98% for the second year, ensures momentum will remain intact.  On the options front, maximum Nifty Put OI is at 9500 and 9600 strike while maximum Call OI remains at 9700 and 9800 strike which is restricting its upside momentum. On weekly charts, Nifty formed a Doji candle which indicates pause post two weeks of a strong rally with the major trend remaining intact. Weekly bars higher top and higher bottom pattern shows a bullish implication.  Nifty can move towards a fresh high till 9850 if it sustains above 9680-9700 zone and major support remains at 9580 level.

...& ANALYSIS

• The US FOMC statement and Bank of Japan Policy meeting are key global events this week
   
• FM’s review of  public sector banks’ performance, among others will be keenly watched this week

The writer is vice-president-equity advisory, Motilal Oswal Securities