However, the recent movement in the Nifty suggests a time-based correction. Vinod Nair, Head of Research at Geojit Financial Services, said, “As domestic investors await cues from the upcoming Union Budget, consolidation is likely in the near term. There is a growing perception that the government may focus on welfare, which will boost consumption-based stocks.”
This week will be a short holiday as the markets will be closed on Monday on account of Eid.
Here are the key factors that will decide the fate of Nifty bulls this week:
1) Global Market
The Dow Jones ended the week down 0.65%, the FTSE lost over 1%, the Hang Seng fell 2.3%, and Japan’s Nikkei closed with a weekly gain of 0.44%.
Britain’s economy showed no growth as gross domestic product (GDP) remained flat in April following a 0.4% rise in March.
CPI inflation in the US remained stable in May compared to a 0.3% rise in April, indicating a fall in prices of essential commodities. The Federal Reserve kept its key interest rate unchanged at the FOMC meeting and lowered its forecast from three rate cuts this year to just one in 2024 after inflation accelerated in early 2024.
2) Macro signals
The market will also keep an eye on industrial production data of India, China and Eurozone inflation. The Bank of England will also announce its interest rate decision on June 20.
3) FII flows
FII selling on Dalal Street has reduced since June 4, when the election results fell short of market expectations. According to NSDL data, net selling stood at Rs 3,063 crore till June 14.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The resilience of the market and retail investors’ eagerness to buy on every dip in the market will force FPIs to reduce their selling, which was sustained in May. However, if the market continues to rally from here, FPIs may again become sellers in India and buyers in other markets like Hong Kong, which are much cheaper than India.”
4) Technical
Analysts believe the 22,800-23,100 zone will provide support for profit-taking, and a decisive close above 23,600 could take the index to a new milestone of 24,000. “Apart from key sectors, we recommend focusing on themes like agri, chemicals, cement and select defence stocks, which are attracting significant interest for long-term trading. However, traders should exercise caution and select midcap and smallcap stocks wisely despite the current surge,” said Ajit Mishra of Religare Broking.
5) Announcements of the new government
Market participants will be eyeing the release of the 100-day plan of various ministries. Defence stocks rose after the Defence Ministry’s announcement last week to increase military exports to Rs 50,000 crore.
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