Nifty up for three straight weeks. What’s Next?

Index CloseChange% Chg
NIFTY 50 16584 232+1.42%
NIFTY BANK35275-338-0.95%
Weekly percentage changes in Nifty and Bank Nifty.

Why the Retail Investors losing interest in the stock market?

Since FY 2020, the number of dematerialized (Demat) accounts has seen record growth. The number of Demat accounts has more than doubled to 8 crores. Further, the retail investors opened about five crore Demat accounts in the last two years. In FY 2021-22, Demat accounts, equity cash market turnover and derivative volume all grew. Despite having a record number of active Demat accounts and market growth, why the retail investors losing interest in the stock market now?

Reason for record Growth of Retail Investors

The biggest reason for retail participation is attractive returns given by the stock market in the last two years compared with any other asset class. Likewise, the expectation of earning higher returns was drawing investors toward the equity market.

Why is the Retail Investor interest waning?

In May, the Equity mutual funds AUM (Asset under management) declined, Retail investors opened fewer Demat accounts, and the stock exchanges witnessed low volumes. The charm of exotic returns from stocks vanished in May. Though this charm will be back, for now, a few reasons for the dull interest of retail investors are:

  • Low market returns and high volatility
  • Uncertainly around fiscal and geopolitical issues
  • Dull IPO returns
  • Rising interest rates–opportunity to switch to fixed-income securities
  • Lack of awareness.

Often, the retail investor comes to the market near the peak and leaves the market when it is time to stay invested. However, awareness, education, and experience are essential during volatile and cyclic movements. Further, systematic investment and long-term horizon, similar to mutual funds, are also required in direct equity investments.

The results are always brutal; if you consider the stock market a quick-buck machine and invest based on tips and rumours.

Market – Weekly Update

The Nifty is up for the three straight weeks and closed at 16584. Up about 232 points or 1.42 per cent during the week. Most of the weekly gains are from Monday and Friday market action. However, the Bank Nifty was down by 338 points or 0.95 per cent during the week. The broader market followed the benchmarks indices. The Nifty Midcap 50 was up 1.55 per cent during the week. Meanwhile, Small cap 50 outperformed the benchmarks and was up 4.04 per cent during the week.

Nifty weekly data chart. Consolidation phase continues, and this is the reason Retail Investors losing interest in the stocks.
Nifty – appears to form the bottom. The range-bound trade may continue next week as well.

Even though the market was up during the week, 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

FIIs and Volatility

The FIIs were net sellers during the week, and the DIIs were the net buyers. Meanwhile, the volatility index India Vix closed at 19.98, softened by 1.50 points or 7 per cent week over week. Further, the volatility index is down for three straight weeks.

Nifty Market breadth

The market breadth was balanced during the week, mostly remained in favour of the advancing shares. The weekly advance-declined ratio was 1.23.

Top Gainers of the Week

CompanyCloseChange% Chg
TCS3440179 5.49%
Top five gainers of the week.

The other notable gainers of the week were Adani Ports up +5.26 per cent, Infosys up +4.18 per cent, Tata consumer products up +4.0 per cent, HCL Tech up +3.88 per cent, and IOC up +3.51 per cent.
The shares of Mahindra & Mahindra are in the top gainers list for two consecutive weeks. It made a new 52-week high during the week. Similarly, ONGC is back in the top gainers list after witnessing weakness for the last three weeks, maybe because of over sold or short covering.

Top Losers of the Week

CompanyCloseChange% Chg
Top five losers of the week.

The other notable losers of the week were Bajaj Auto down -4.17 per cent, Grasim down -4.15 per cent, Maruti down -3.0 per cent, Nestle down -2.66 per cent, and HDFC down -2.27 per cent.
The shares of Shree Cement and Ultra Tech Cement are witnessing weakness for the last three weeks. Hero motor is gaining steadily for the last three weeks. This week it’s in losers list which may be because of the over bought condition.
Similarly, Kotak bank is witnessing buying interest and gaining. This week it’s in losers list which may be because of over bought condition. From 1708 on April 19 to 1946 on May 27, it has gained about 14 per cent in the short duration.
View the list of all the Nifty 50 contributors.

Nifty Sectors and Broader Indices

IT +4.41%
FMCG +0.08%
Pharma -1.98%
Oil and Gas +3.94%
Metal +2.25%
Auto +0.11%

Midcap 50 +1.55%
Smallcap 50 +4.04%

Looking forward – Retail Investors

The markets are forward-looking, and in the future, the risks of missing fiscal deficit target, high inflation and downgrade to GDP growth estimates are causing nervousness. There is a risk that the fiscal measures taken may take more time to provide the desired results. The inflation might stay sturdy a little longer than expected, before falling.

The Nifty has made triple tops in the last seven months and failed to surpass the previous highs. In the short term, it looks like the market is in a trading range of 15800 to 16800.

Nifty Weekly Pivots

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

As per the above pivots data, 16400-16750 is the Nifty 50 trading range for the next week. The support is around the 16400 level, and then around 16250 level. If the market breaks the 16250 level, such a break can drag the Nifty down to 15800 or below levels in the short term. And on the upside, we might again see selling around 16700 level. Refer to the above chart, 16700-16800 is the immediate resistance level.
View the Pivot Calculator.

Read our earlier blogs here.
“Invest in Peace, Bro,”
China Bull In Nifty Shop
Has the Global Downturn started?

The Nifty closing price is now above 20-day moving average, though it is still below the 50-day moving average and the 200-day moving average. And the 50-day moving average price is below the 200-day moving average price.

While positive global clues, easing of covid restrictions in China and the expectations of a normal monsoon in India are positive indicators, however, the first half of June might keep traders busy with Fed, RBI and Interest rates.

As noted in the daily blog, is it time to buy or sell? The topsy-turvy ride and chop around the gap down of May 6 and May 9 continued during the week. It’s a dull market because of low volumes and waiting for triggers. Hopefully, the sell-on-rally is not back next week.

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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