Will the Eased US Recession Fears Propel the Nifty to New Heights?

At the close, the Nifty 50 was at 24,541.15 up by 1.65%

On August 16, the NSE Nifty 50 delivered a thrilling comeback, opening in the green and surging 1.65% to close at 24,541.15. The excitement stemmed from a flurry of positive macroeconomic news from the U.S. and mounting expectations of a Federal Reserve rate cut, propelling the index to surpass the 24,500 milestone.

This rally was fueled by encouraging U.S. economic data: consumer price inflation fell to 2.9%, its first drop below 3% since March 2021, and jobless claims slid to 227,000, the lowest in five weeks. These signals eased recession fears and provided a solid foundation for global markets, boosting domestic stocks.

The Indian IT sector continued its impressive run, climbing nearly 2.5% for the fifth consecutive day, driven by optimism over a potential Federal Reserve rate cut in September. The Nifty 50’s robust rally included a significant 397.40-point surge and a striking long bull candle on the daily chart, hinting at a positive shift in market sentiment.

Yet, the market faces hurdles. Domestic concerns like a drop in wholesale price index (WPI) inflation, weaker industrial production, and lukewarm first-quarter earnings suggest that gains might be capped. Foreign institutional investors (FIIs) remain cautious, maintaining a net seller stance.

With volatility dipping below 15 and the India VIX falling by 6.68% to 14.4, the bulls seem to have the upper hand. But as global and domestic conditions evolve, a crucial question looms: Will the Nifty 50’s bullish trend endure despite emerging economic challenges, or will shifting signals prompt a market reversal?

Bank Nifty: Up by 1.59%

The Bank Nifty and the BSE Sensex demonstrated strong performance, signaling a positive shift in the Indian equity markets. The Bank Nifty opened with notable gains, rising by 1.59% and closing at 50,516.90.

Similarly, the BSE Sensex mirrored this upward trend, climbing 1.68% to end the day at a remarkable 80,436.84.

In the sectorial front, the IT sector is making waves with a solid 2.89% gain, capturing everyone’s attention. Leading the charge, Mphasis Ltd. surged an impressive 6.96%, while L&T Technology Services Ltd. followed closely with a 5.56% jump. On a day when there were no losers in the sector, it’s clear that IT is dominating the market buzz.

Foreign Institutional Investors (FII) recorded a buy value of Rs. 18,494.25 crore and a sale value of Rs. 17,727.73 crore, resulting in a net buy of Rs. 766.52 crore.

Domestic Institutional Investors (DII) also demonstrated strong activity, with a buy value of Rs. 12,795.70 crore and a sale value of Rs. 10,189.52 crore, leading to a substantial net buy of Rs. 2,606.18 crore

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included ICICI Bank with a 2.31% increase, IDFC First Bank with a 1.88% increase, IndusInd Bank with a 1.83% increase, AU Bank with a 1.73% increase, and Bank of Baroda with a 1.69% increase.

On the other hand, the biggest losers in the sector included Punjab National Bank with a 0.42% decline. These results suggest that most of the banking stocks performed better for the day.

Gold and Silver Rate (INR) 16th August, 2024

Rupee Holds Steady: Is the Indian Currency Ready for a Breakthrough?

In a week marked by fluctuations, the Indian rupee managed to stay relatively stable, closing at 83.94 against the U.S. dollar on Friday. This finish represents a negligible change from its previous close of 83.9475, showcasing the currency’s resilience amidst a turbulent global financial landscape. Despite its tight band, the rupee’s performance was flat both for the day and week, maintaining its position above its record low.

The stability in the rupee can be attributed to several factors. Notably, mild dollar sales from foreign banks, likely on behalf of custodial clients, provided essential support. This intervention helped the rupee avoid breaching its all-time low, despite pressures from outflows in local equities and strong dollar demand from importers. The Reserve Bank of India (RBI) has also played a crucial role, routinely intervening through state-run banks to keep the rupee above the psychologically significant 84 mark.

However, there is a discernible pattern emerging. State-run banks tend to offer dollars every time the USD/INR exchange rate approaches 83.97, indicating a cautious stance at these levels and limiting the appetite for long positions. This strategy aims to prevent the rupee from falling further, reflecting a concerted effort to maintain currency stability.

Additionally, the decline in dollar-rupee forward premiums, with the 1-year implied yield dropping 5 basis points to 2.05%, underscores the impact of rising U.S. bond yields on currency markets.

As we look ahead, the key question is: Will the rupee break through its current constraints and strengthen further, or will the ongoing challenges continue to weigh on its performance? Is there potential for the currency to gain traction, or will it remain in a holding pattern?

Stocks Highlights

Wipro Ltd.’s shares jumped 4.23%, rising from Rs 495.15 to Rs 516.10, despite a 0.39% sales drop—its first in three years. This could signal a bullish trend, especially with a recent five-day moving average crossover, which historically leads to a 2.57% gain in the following week.

But keep in mind, Wipro has struggled over the past three years, with its stock down 19.55% compared to the Nifty 100’s 50.52% gain. The company is also facing high costs, spending 1.4% of its operating revenue on interest and a hefty 61.2% on employees.

Meanwhile, Divi’s Laboratories Ltd. saw a slight 0.62% dip to Rs 4,633.15, with a 20-day moving average crossover hinting at a potential 2.91% decline over the next week. The stock’s three-year return is down 5.79%, far behind the Nifty 100’s 50.52% rise. Despite a steep 90.07% drop in cash from investing activities, Divi’s has kept its interest and employee costs low.

Advance Decline Ratio

Today, the advance-decline ratio was 2.13, and the market breadth was positive. The volatility index India Vix decreased by 6.68 to settle at 14.40 and the FIIs were net buyers today.

DAILY MARKET ACTION
Advancers – 1827
Decliners – 859
52Wk High – 95
52Wk Low – 31
High Band Hitters – 112
Low Band Hitters – 76
200d SMA – 22203
50d SMA – 24108
20d SMA – 24477

Top Gainers and Losers Stocks

The top gainers were Wipro (+4.23%), Tech Mahindra (+3.98%), Grasim (+3.65%), M&M (+3.45%), and Tata Motors (+3.36%).

The top losers were Divi’s Laboratories (-0.62%), SBI Life (-0.07%), and Dr. Reddy (-0.02%).

Top Gainers and Losers Sectors

The top gainers sector were IT (+2.89%), Realty (+2.49%), Media (+2.09%), Auto (+2.01%), and Financial Services (+1.70%).

SECTORS – NOTABLE ACTION
IT +2.89%
REALTY +2.49%
MEDIA +2.09%

Stocks Ban List

(SEBI) F&O ban list INDIACEM 364.95 -0.75 (-0.21%), PEL 947.35 64.95 (7.36%), AARTIIND 603.25 4.25 (0.71%), GNFC 650.60 0.90 (0.14%), SUNTV 821.75 8.65 (1.06%), NMDC 217.45 6.51 (3.09%), LICHSGFIN 658.25 14.70 (2.28%), ABFRL 319.45 8.35 (2.68%), CHAMBLFERT 491.05 5.00 (1.03%), GRANULES 662.35 -6.95 (-1.04%), BANDHANBNK 662.35 -6.95 (-1.04%), SAIL 128.28 3.05 (2.44%), MANAPPURAM 128.28 3.05 (2.44%), INDIAMART 2748.70 75.35 (2.82%), PNB 113.04 -0.53 (-0.47%), RBLBANK 207.11 1.44 (0.70%), BIOCON 340.95 13.30 (4.06%), BSOFT 600.65 34.65 (6.12%), and ABCAPITAL 216.09 12.62 (6.20%) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

HINDCOPPER, EXIDEIND, IEX, IDFCFIRSTB, NATIONALUM, SBICARD, BATAINDIA, HAL, BANKBARODA, IDEA, CONCOR, and IRCTC stocks has the possibilities of entrance in the ban list.

INDIAMART, PNB, RBLBANK, BIOCON, BSOFT, and ABCAPITAL stocks has the possibilities of exit from the ban list.

Daily Pivots

As per the above pivots data, 24250 to 24800 is the Nifty 50 trading range.

Read Previous -Daily Insights- here
Indian Markets Break Free from Losing Streak—Can IT Stocks Sustain the Rally?
Why Did the Nifty 50 Drop Today Despite Positive Asian Signals?

This article is only for educational purposes and is not an investment advice.