This Week in a nutshell (July 12th to July 16th)

Technical talks

NIFTY opened the week on 12th July at 15,767 and closed on 16th July at 15,923. The index made a gain of 0.9% this week. On the downside, 10DMA of 15,816 might act as a support. Flat RSI (62) suggests a consolidation before making a strong move on either side.

Weekly highlights

• The market started the week on a positive note but erased intraday gains as key inflation data was released.
• Consumer Price Index-based inflation (CPI) for the month of June rose 6.3 percent, as food prices hardened further, and transportation costs rose due to higher petrol and diesel prices.
• Food inflation (CFPI) came in at ~5.2 percent in June, compared with ~5.0 percent in May, as food prices continued to remain inflated, official data by the National Statistical Office showed on July 12.
• Most of the IT companies reported this week with strong numbers and also increased the revenue guidance for FY22 leading Nifty to hit fresh highs. NIFTY IT was up 2.6% this week followed by NIFTY PHARMA (+1.9%) and NIFTY PRIVATE BANK (+1.8%).
• Positive global cues, rally in IT stocks, comments from the US Federal Reserve and rally in banks pushed the benchmarks to record high. However, profit booking at all-time high levels pushed benchmark indices lower as they snapped the three-day winning run-on Friday. IT stocks saw intense selling while banks also contributed to the fall.
• Nasdaq and the S&P 500 were hitting record highs at the beginning of the week as investors awaited the start of the second-quarter earnings season and a batch of economic data to gauge the next leg of the equity market. But the rally was short-lived as the biggest hike in U.S. inflation in 13 years rattled investors who fear rising interest rates could end a stock market rally that has doubled prices from 2020 lows.
• Federal Reserve Chair Jerome Powell commented that US monetary policy will offer powerful support to the economy until the recovery is complete and the pace of price increases will likely remain elevated in coming months before moderating. The language indicated that he saw no need to rush the shift towards post-pandemic policy. Long-term inflation expectations, remained consistent with the Fed’s 2% inflation target.
• Post comment the US indices fell as a rally in growth stocks ran out of steam even though US unemployment claims fell to 3,60,000 which is the its lowest level since the pandemic struck last year and strengthened views about a recovery in the labor market.
• Late Thursday, Treasury Secretary Janet Yellen warned that prices could continue to rise for several more months, expects inflation to reach normal levels in medium term and to keep a careful eye on it.
• The stock market was falling Friday following Yellen’s comments on inflation and snapped a three-week winning streak. All three major indexes notched weekly losses. The S&P 500 and Dow shed 1% and 0.5%, respectively. The Nasdaq fell 1.9%.
• The foreign institutional investors (FII) sold Rs 15,350 mn worth of Indian equity shares in the week. Domestic institutional investors (DII) undertook Rs 21,000 mn of net buying during this week.

Things to watch out for next week

• Next week, investors’ focus will largely be dominated by the quarterly results. As in half of the duration of the June quarter, the economy was in a lockdown, investors will look beyond the earnings print or just the quantitative number and focus on the qualitative commentary provided by management.