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D-Street drums its own beat

Bulls have total control of Indian indices as markets continue to rise higher with each passing week. India affixed another feather to its cap by surpassing France, for the first time, in terms of market capitalization to claim the world's sixth largest stock market position. In only 15 days in September, Nifty50 rose over 3% in contrast to the world's major markets, like S&P 500 and Hang Seng which plunged nearly 1% and 4% respectively. This contrast between India and the rest of the world is caused, in part, by several macroeconomic factors acting against these well-established markets. And, in the US, the increase of delta variant is causing months of recovery to fade quickly, naturally making investors apprehensive. Even the buoyancy which stemmed from MoM moderation in consumer inflation is outweighed by fear of probable corporate tax hikes in the US.  China, on the other hand, is witnessing a dip in retail sales and industrial production raising concerns about a full-proof economic recovery. The republic is also under dual pressures of regulatory scrutiny and a possible default by its second largest property developer by sales. Normally, India's bourses are in sync with global bourses but not this time! The Centre's regulatory push for improving manufacturing capacities in many industries has kept the faith around India's narrative intact. PLI is enhancing the Make in India drive, which is propelling investors’ sentiment to new heights. The August CPI figures have also offered timely respite, allowing markets to stay charged. This divergent behavior may not last long but until then Indian investors can continue to ride their existing positions.

Event of the week

Nifty IT is the flavour of September rising ~6% vs. the benchmark's rise of 3%. Midcaps outperformed their larger peers helping to keep the sector in the spotlight, after a boutade of cloud and digital transformation within industries as well as an explosion in job opportunities. IT professional hiring has been off the charts showing that companies' human capital demands are rising as a result of solid order books and resilient client pipelines. The weakening of the rupee also played a role in keeping the industry adrift, pushing up momentum. A SIP strategy in fundamentally sound IT stocks may turn out to be an effective way to normalise the valuations of stronger players.

Technical Outlook

Nifty 50 index ended positive for the week, however, in the last trading session the index posted a reversal bar. Similarly, the BankNifty index also posted a reversal bar after making a new high. In the short term, the market is trading overbought and may witness a small profit booking dip going ahead. The overall positional outlook on the market remains bullish as long as it doesn’t cross 17,500 because a break below the same will put a halt to the ongoing momentum. Immediate support and resistance are now placed at 17400 and 17900 respectively.

Expectations for the week

Investors across the world will be eyeing the FOMC meeting in the coming week for more clarity on the outlook for both tapering as well as interest rate timelines. While the Fed's planned reduction of bond purchases has garnered much of the focus this year, their view on interest rates may give new information that may move markets world over. However, it is widely assumed that policymakers would take fresh developments in inflation and the intensity of the delta variant into account before announcing tapering plans. Therefore, traders are suggested to refrain from taking aggressive bets owing to probability of unanticipated whipsaw movements. Nifty50 closed the week at 17585.15, up by 1.24%.