A breach in crucial supports could mean end of Nifty's 17-week rally

Nifty fell 0.5 PER CENT over the week after gaining for the previous four weeks. 19,562 becomes a crucial support for the Nifty below which a fall of another 2 per cent could follow and the 17-week rally from the low of 16,828 could be said to have ended, says Deepak Jasani, Head of Retail Research, HDFC Securities.

Vinod Nair, Head of Research at Geojit Financial Services said the domestic market passed through a volatile week, with the benchmark index underperforming its broader peers.

The recent correction of the domestic market can be attributed to several headwinds, including mixed Q1 results, a reversal in FII activity, a rising dollar index & US bond yields, and an increase in crude oil prices, he said.

In the coming days, domestic earnings will remain a crucial driver, while global cues will also play a vital role in shaping market trends, he said.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities said the Nifty seems to have formed a new lower high on Thursday, which reflects ongoing downward correction in the market.

This is also suggesting a possibility of selling pressure emerging on any upside bounce from here.

Corporate earnings season started on a weak note – Nifty-50 (ex-financial & commodity) operating earnings grew by 11% YoY, 3 per cent behind expectations, Antique Stock Broking said in a research.

The miss in terms of operating earnings was largely driven by IT services, cement, and FMCG. Overall, the domestic demand momentum continues in banks, cement, and real estate; while FMCG was a laggard.

“Broadly, we continue to believe that the market appears to be capped in the near term given elevated valuation amidst slower growth in advanced economies in the near term,” the report said.

Indian equities remain near life-time high levels, supported by strong FPI equity flows, highest CYTD among select EMs and the highest for the fifth month in a row, the report said.

Tanvee Gupta Jain, UBS India Economist says economic momentum in India has been sustained so far, even as reopening tailwinds have gradually faded and global headwinds remain.

However, on a monthly basis, sequential momentum has started to soften, with the lead indicator up only 0.9 per cent MoM in June compared with 1.8 per cent MoM and 2.1 per cent MoM in the previous two months.

“We maintain our view that despite reasonable headline growth, the underlying economic recovery post-pandemic remains uneven when looked at in terms of the rural-urban divide, manufacturing vs. services growth and/or affluent vs. lower-income household demand,” Jain said.

“We anticipate sequential normalisation in household consumption growth to continue as purchasing power is impacted by tight monetary policy and the depletion of accumulated pandemic savings. Capex growth has largely held up on higher government (centre and state) capex and strong demand for residential real estate.

"However, the pick-up in private corporate capex remains gradual on weak goods export demand and global growth uncertainty. Finally, while India's goods exports have contracted for the past five months, services exports have remained largely stable," she added.