Rising interest rates, a stronger dollar, higher inflation, and larger deficits. What’s Next?

Index CloseChange% Chg
NIFTY 50 15699 406+2.65%
NIFTY BANK33627 884+2.70%
Weekly percentage changes in Nifty and Bank Nifty.

Buy, Sell or Hold?

The stock market’s performance over the last two weeks, which saw it fall 5.12 percent and rise 2.65 percent, has investors wondering whether they should buy, sell, hold, or do nothing.

During the week, there were up, down, and up moves. Nifty was up +0.37 percent on Monday, +1.88 percent on Tuesday, down -1.44 percent on Wednesday, and up again on Thursday and Friday.

As mentioned in the previous weekly blog, the RSI and MACD indicators were reading low because of heavy selling, showing the possibility of a relief rally. Now that the relief rally or technical pullback has arrived, the bigger question is whether to buy, sell, or hold?

Falling Brent crude, natural gas, and palm oil prices are all positive economic news because they reduce import dependency, improve company margins, and help save forex reserves. Positive economic data and strong global cues boosted market sentiment this week.

However, the rupee fell to a new low against the dollar because of rising US bond yields and geopolitical concerns.

Similarly, strong demand and continued sanctions against Russia may keep crude prices high. And the high crude prices will affect the current account deficit and may keep the rupee under pressure.

Furthermore, if commodity prices fall because of recession fears, the weekly gains may not last long, as any technical pullback without improving fundamentals may not continue longer.

Should you buy, sell or hold ?

The answer may not be obvious, and much depends on your investment style and time horizon for remaining invested. As some stocks that are currently a good buy for long-term investors may not be the best options for day traders.

However, if you ignore all the noise and consider only the price actions, the picture becomes clearer, at least in the short term.

Nifty daily data – Renko Chart

The above Renko chart filters out all the noise and focuses solely on price movements. It is useful for identifying key support and resistance levels. The Renko chart currently has a negative bias and is trending downward.

Market – Weekly Update

The Nifty and Bank Nifty both closed in the green during the week. Similarly, the broader market also followed the benchmark indices. Further, the Nifty Midcap 50 was up 2.18 percent during the week. Meanwhile, Small cap 50 was up 2.98 percent during the week.

Buy sell hold Nifty weekly data
Buy sell hold – Nifty weekly data

Structurally, nothing major changed during the week. The concerns of the previous weeks remain as is, which are:

  • Geopolitical- Russia Ukraine War 
  • Rising Inflation
  • US Fed and RBI tightening policy
  • Rising Interest Rates 
  • FII selling from Emerging Markets
  • Rising US Dollar

Nifty Market breadth and Volatility

The market breadth was positive during the week, the weekly advance-declined ratio was 1.22. Similarly, the volatility index India Vix fell 9.71 percent and closed at 20.55. Further, as has been the case for several months, the FII/FPI were net sellers during the week.

Top Gainers of the Week

The top gainers in the Nifty 50 were Hero Motors (+11.88%), Eicher Motors (+10.48%), HUL (+9.19%), Maruti (+8.78%) and M&M (+7.41%).

Top Losers of the Week

The top losers in the Nifty 50 were Tata Steel (-5.95%), UPL (-3.61%), Hindalco (-3.59%), Reliance (-3.47%) and Coal India (-3.28%).

Nifty Sectors and Broader Indices

Metal -2.71%
Oil and Gas -0.07%
IT -3.91%
Auto -6.95%

FMCG -4.18%

Looking forward

Previously, the Nifty broke through the 15800 – 16800 level box on the downside, and 15800 is a significant resistance to overcome before any meaningful run. 

Further, currently, the Nifty is trading below its 20-day, 50-day, and 200-day simple moving averages.

Nifty Weekly Pivots

S2 S1 R1 R2
Pivots are calculated using the weekly data.

As per the above pivots data, 15350 to 15900 is the Nifty 50 trading range for the next week. The support is around the 15350 level, and then around 15000 level. If the market breaks the 15000 level, such a break can drag the Nifty down to 14750 or below levels in the short term. And on the upside, we might again see selling around 15800 level.

Because there is no major economic news or data release in the upcoming week, the benchmark indices may remain volatile, particularly because of the monthly options expiry week.

The range-bound consolidation may continue for some more time. And it is preferable to have a proper trading plan in place before opening new positions.

Read our earlier blogs here.
Is this the beginning of a new economic cycle?
How does the rising dollar impact you?
Why the Retail Investors losing interest in the stock market?

This article is only for educational purposes and is not an investment advice. Please consult with your investment advisor before investing.

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