Nifty crosses another significant milestone of 16k:
In the month of July both Nifty and Sensex were trading sideways with a slight positive bias. Nifty traded in the range of 300 points throughout the month and closed with a minor gain of 0.26%. As highlighted in our previous market outlook, we expected a narrow sideways range with a slight positive bias. The nifty ended Jul’21 at 15763 and Sensex at 52587. The market in July was directionless due to the absence of any significant developments in macro-economic factors. July witnessed the highest sell-off by FIIs since March 2020 as markets tread a rocky path with valuations at all time high & escalation in third wave concerns. However, it was equally compensated by DII buying in the same period. DII investing has gained good importance in the market in recent years which was earlier dominated by FIIs for market direction and the major reason is the increasing penetration & regular investment by the Indian Investors. In the first week of August, there was a huge breakout which helped nifty reach a new mile stone above 16000 after trading sideways with volatility for few months. The global markets have also done well so far except the Chinese & Hong Kong market selloff in the last month which is now stabilizing.
Looking at the sectorial performance we can see that most of the sector performed positively. There were a few sectors which had stellar performances they were Realty, metals & IT and few sectors that lagged behind were Auto, Media & PSU Banking. The outlook for our market remains positive for this month because of huge breakout above 16k and sectors which can do well includes Banking, Pharma FMCG, Auto including Midcap and small caps.
Important events & Updates
Few important events of the last month and upcoming are as below:
- The RBI’s MPC meeting concluded this week with decision to maintain status quo and keep interest rates unchanged. Currently, the repo rate is 4% and reverse repo rate is 3.35%.
- Data from the Centre for Monitoring Indian Economy (CMIE) shows that the India’s July unemployment rate fell to 6.95% from the June figure of 9.17%.
- The IMF which had earlier in March forecasted India’s economic growth rate to be around 12.5% for FY21 sharply revised India’s growth rate to 9.5 per cent from 12.5 per cent on 27th July.
- Chinese & Hong Kong market rattled last month on crackdown by the Chinese regulators on Tech companies included online education sector. However, the ripple effect was not on other markets and now these markets are stabilising.
- India Vaccination program – India’s biggest vaccination drive launched this year is in full swing. As of Aug 6, number of Covid-19 vaccine doses has crossed 432 Cr.
Outlook for the Indian Market
The market outlook remains positive for the month of Aug including the rest of the year. The broader target of the nifty is expected between 16500 to 17500 if there are no major developments in Indian as well as Global markets. The Indian market has given a return of 13% so far in this year after stellar return last year. The market cap has crossed 240 lakhs crores and has greatly enhanced shareholders wealth. One of the major concerns still looming at this point is the forecast of third wave of Corona which can impact anytime soon and which if it happens can have serious consequences. The outlook for this month on fundamentals & technicals are explained.
Fundamental outlook: In the last month the Indian market even though was volatile remained well within its range and was not majorly affected by negative performance by the Asia pack especially Chinese & Hang Seng market which struggled after the Chinese Government’s actions triggered regulatory fears over sectors such as technology and private education. In the last couple of days after Sensex and NSE Nifty50 hit the new milestone we have seen increase in FII investments which indicates investor confidence on the Indian economy. We expect some volatility, consolidation with positive bias for this month.
Technical outlook: Nifty50 is currently at an all-time high is expected to go up further reaching 17000 levels by the end of the year. The outlook remains positive with some consolidation and based on technical there is an immediate resistance at 16350 and major resistance around 16,750 levels in the month of Aug. There is immediate support at 15250 levels and major support at 14800 levels. The RSI for Nifty50 is around 75 which signify that it is near the overbought zone.
Outlook for the Global Market
The Global market outlook remains positive but the recovery rate of the economies remains uneven. The US fed as expected last week announced that it has chosen to leave interest rates and the asset purchase program unchanged for now. The Fed hinted that it might be getting closer to the day when it will choose to scale back the asset purchasing program. However, the downward movement of US bond yields suggests that investors are not expecting an imminent shift in Fed policy. The economy in Europe seems to have bounced back. Asian market especially Chinese market has also stabilized from the sharp sell off last month. Most the global economies are slowly reopening and hence the global economic growth rate projected by the IMF remains the same. The outlook remains side-ways with positive bias.
Outlook for Gold
Gold market had started off 2021 on a weaker note due to the economic recovery from the pandemic. In the month of July gold remained around the 47800-47900 range and was trading sideways. Due to the concerns for the 3rd way the gold prices are expected to be slightly positive but as of now there is no significant trend in Gold.
What should Investors do?
The market valuations appear stretched at this level. Timing the market is futile; hence many investors have missed the opportunity when the market made strong recovery as they were waiting to make entry at lower levels which never happened. However, we have always advised our Investors to stick to systematic investing with discipline to create long term wealth as India’s growth story is intact and high possibility of long Bull Run in the Indian market in years / decades to come. Hence, a simple strategy for investors to remain in the market is to continue to hold their longs in strong players, continue with their SIPs, while those on sidelines can enter on market pullbacks, however aggressive investments can be avoided for now. We also keep our Investors informed and take timely actions about any major events impacting Indian and global markets as we did last month during crackdown in the Chinese markets and will continue to do so in future.
Apart from stretched valuations and inflation worries, the word on the Street is all about IPOs and how the subscriptions have hit the roof despite unreasonable valuation of certain companies. “Carpe diem” (meaning – used to urge someone to make the most of the present time and give little thought to the future) seems to be the motto of investors but what is amusing is banks and financial institutions have gained equal if not more interest than retail participants in primary markets in the recent past.
Here is an opportunity for you to attend the upcoming webinar “Demystifying the IPO puzzle” on 14th Aug’21 and you can avail this golden opportunity by reserving your seat as limited seats are available and registration will be closing soon.
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The session covers…
• Overview of IPO market & its significance
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• how to evaluate an IPO and decide whether to invest or not
• Process to apply for an IPO and eligibility criteria
• Guidance & Tips to maximize allotment for the good IPOs
Followed by Q&A and discussions.
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This article should not be construed as an investment advise, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in now