Dear
Trader…
Narrowing their weekly losses sparked by a brutal sell-off
earlier this week, Indian benchmark equity indices Sensex and Nifty closed over
1% higher on Friday, led by IT stocks, as a larger-than-expected drop in U.S.
unemployment claims eased recession fears in the world’s largest economy.
The BSE benchmark Sensex gained 820 points or 1.04% to settle
at 79,706.The broader NSE Nifty future advanced 267 points or 1.11% to end at
24,368.
Meanwhile, the market capitalisation of all listed companies
on the BSE surged by Rs 4.5 lakh crore to Rs 450.2 lakh crore.
Except for Kotak Mahindra Bank and Sun Pharma, all Sensex
stocks closed in the green, with Tech Mahindra, Tata Motors, M&M, JSW
Steel, HCL Tech, and SBI leading the gains, rising between 2% and 2.7%.
All major sectoral indices also ended in the green, with
Auto, IT, Media, PSU Bank, Realty, and Oil & Gas sectors rising between 1%
and 2%. Meanwhile, the fear gauge India VIX declined by 7.45% to 15.37.
Here
are the top factors aiding the rally: –
1)
Strong U.S. Labor Market – Overnight,
U.S. jobless claims fell more than expected, easing fears of a weakening labor
market. However, this data led to reduced expectations of a larger rate cut
from the Federal Reserve, with the probability of a half-point cut in September
dropping from 69% to 54%. The robust U.S. labor market and tempered rate cut
expectations are seen as positive for global equity markets, as they signal
continued economic resilience without the need for aggressive monetary easing.
2) Positive Chinese inflation data –Supporting market sentiment, Chinese data
revealed that consumer inflation rose by 0.5% in July, surpassing forecasts of
a 0.3% increase. This suggests a reduced risk of the Chinese economy slipping
into deflation, which is reassuring for global markets. In response, Chinese
blue-chip stocks gained up to 0.5% during market hours, while Hong Kong’s Hang
Seng index closed 1.2% higher. The stronger-than-expected inflation data
signals underlying economic stability in China.
3) Rebound in US market – U.S. stocks jumped on Thursday, with all three indices
closing sharply higher after jobless claims fell more than expected in the
latest week, soothing worries the labor market was weakening too quickly. The
S&P 500, Nasdaq Composite, and Dow Jones Industrial Average rose 1.8-2.9%.
This positive sentiment carried over into the Indian market, contributing to
the strong gains seen in Friday’s trading session.
4) Oil prices below $80 – Oil prices were flat on Friday, with Brent crude
futures at $79.17 per barrel and U.S. West Texas Intermediate crude futures at
$76.27 per barrel. However, they gained over 3% on a weekly basis. Despite
these gains, prices remained below the $80 mark.
The decline in oil prices is positive for market
sentiment, as it could help ease global inflationary pressures.
5) Carry Trade Volatility Eases – Three-quarters of the global carry trade has now
been removed, with a recent selloff erasing this year’s gains, according to
JPMorgan Chase & Co. With the central bank calendar light for August and
volatility starting to cool off, there is a small opportunity for a rebound in
equities. This could create a more stable environment for equity markets to
recover in the short term, as the worst of the selloff might be behind.
6) Bottom fishing – In the wake of the recent selloff, investors are
seizing opportunities to buy undervalued assets. The sharp decline in equity
markets and subsequent market volatility have created a potential buying
opportunity for those looking to capitalize on lower prices.
Nifty futures opened at 24350 points against the
previous close of 24136 and opened at a low 24316points. Nifty Future closed
with an average movement of 128 points and a rise of around 267 points and
closed 24404 points…!!
Meanwhile, The
sharp rebound in US markets yesterday indicates that the recession fears were a
bit overdone. The latest initial jobless claims came lower than expected
indicating that the labour market is not loosening as many sceptics feared.
Technically, the
important key resistances are placed in Nifty future are at 24404 levels, which
could offer for the market on the higher side. Sustainability above this zone
would signal opens the door for a directional up move with immediate
resistances seen at 24474 – 24570 levels. Immediate support is placed at 24240 –
24180 levels.
Past Performance is not an Indicator of Future Returns. The
securities quoted are for illustration only and are not recommendatory. Investment
in securities market are subject to market risks. Read Disclaimer and related
all the documents carefully before investing, mentioned on www.nikhilbhatt.in
