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MARKET OUTLOOK

Along with the world markets we saw correction in key indices in India as well. But the broader market continues to do well and BSE small cap index increased by 6.8% in last one month. The rally in small cap stocks is continuing uninterrupted since last 5 months and BSE small cap index is up by 43% as compared to 14% for Nifty. We saw improvement in performance in Q4FY23 and Q1FY24 results but we feel now the rally is becoming more driven by large participation of HNI and small retailers than fundamentals alone. Valuation of various scrips in small cap stocks are becoming very demanding and risk reward ratio is now becoming unfavorable. As such one needs to be careful in near term.

At global level especially in US the concern about inflation continues, which will keep the interest rates high. FED has indicated that the current higher interest rates will continue to remain for a longer period of time. Consistent higher interest rates will have negative impact on purchasing power and is likely to result in slowdown in consumer spending. Back in India the retail inflation has moved up in recent past mainly driven by food inflation. Considering the below normal rainfall, we may continue to see higher than expected inflation in India as well. This will restrict RBI to reduce interest rates in near future.

The recent driver of economy that is government spending may also see some softening in H2. Government is doing large part of spending in H1 this year which it generally does in H2 of any year. Next year being elections, we may see some slowdown in government spending on infra in H2 and government may start diverting its spending on populist measures which may create some negative sentiment.

In the second half of September month market will start looking at Q2 result expectations. We expect the results to show an improving trend.

In all, we expect market to remain range bound in September month and Nifty is likely to remain in the range of 19200 -19800.

NIFTY TECHNICAL OUTLOOK

The Bears led the rally in August; the Nifty faced strong resistance at the 19,800-19,990 mark on a closing basis throughout the month.

The Nifty is currently facing strong resistance between 19,470 and 19,540 on a closing basis. Any move above the 19,470 mark would signal a positive rally towards 19,670/19,840 levels.

On the other hand, the Nifty is trading below the Golden Ratio i.e. 61.8% of Extension i.e. 19,370. If it fails to hold this support, i.e. 19,370 on a closing basis, then we may see further sell-off, potentially taking the Nifty towards 19,200/18,800.

The daily momentum indicator is showing positive crossover, indicating a potential up move or consolidation in the index. The overall market outlook remains sideways as profit booking may be seen at higher levels, and some volatility can still be expected. Traders should consider taking profits during rallies and look for opportunities to buy on dips. Any dip towards 19,370-19,200 will contribute to strengthening the Nifty

BANKNIFTY :-Technically, the Bank Nifty has immediate resistance at 44,800. A close above 44,800 may extend the rise towards 45,600/46,200. On the flip side, support is positioned at 43,600 levels. Beyond that, the Bank Nifty may witness a selling pressure towards 42,800-42,400 levels.

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