This week in a nutshell (23rd May – 27th May)

Technical talks

NIFTY opened the week on 23^rd May at 16,291 in the red and ended in the green at 16,352 on 27^th May, after high volatility during the week. The index gained 0.4% during the week. The next support and resistance levels for the index would be 16,253 and 16,414 respectively. It breached its 20 DMA levels and closed above that. The RSI (14) of 48 indicates the index is moving towards the overbought zone.

Among the sectoral indices, FINANCIAL SERVICES (+4.3%), PRIVATE BANK (+4%), and BANK (+3.9%) were the gainers during the week while METAL (-8.7%), OIL AND GAS (-3.7%) and REALTY (-3.3%) led the losers.

Weekly highlights

• US major indices closed the week in green after the 7 weeks of consecutive losses, the S&P 500, Nasdaq, and Dow Jones closed the week with gains of 6%, 7%, and 5% respectively. The rally was led by factors such as minutes from the federal reserve’s FOMC May meeting, a fall in weekly jobless claims, and inflation slowed slightly in April.
• Oil prices settled higher on Friday supported by the demand will continue to be elevated, the Brent crude and WTI crude closed with a gain of 1% and 0.9% respectively.
• The government of India has waived the customs duty on the import of some raw materials used by the steel industry and increased the tax on the exports of iron ore and concentrates to 50% from 30% earlier. This measure was taken to cool off the elevated steel prices in India. These duty changes in raw materials and intermediaries will lead to more availability of steel in the domestic market and reduce the elevated steel prices which give some relief to industries such as auto, construction, etc. who already struggling with supply challenges and input cost pressures.
• On 25^th May 2022, The power ministry said that they are working on a scheme to liquidate the past dues of power distribution companies (discoms). This scheme will provide relief to the entire chain in the power sector which is currently struggling under the pressure of non-payments. Delay of payments by discoms to power generating companies affects the cash flows and disrupts the provisions for the input supply such as coal. But this scheme will provide adequate liquidity and ensures that the discoms will pay their dues regularly.
• Amidst retail inflation surging the government of India announced the reduction in excise duty on petrol and diesel by Rs 8 and Rs 6 per liter respectively, and effectively this will reduce the petrol and diesel price by Rs 9.5 and Rs 7 per liter respectively. Along with the central government, some state governments have also slashed the value-added tax (VAT) on petrol and diesel. This reduction in excise duty on fuel will help the consumers and corporates while battling inflation.
• Department of promotion of industry and internal trade (DPIIT) said the total FDI equity inflows were at USD 58.77bn in FY22 vs USD 59.63bn in FY21 in India, a contraction of 1% in FY22. Although the total FDI into India stood at USD 83.57bn in FY22 and rose by 2%, Singapore, the US, and Mauritius remain the top 3 contributors to FDI while IT, Auto, construction, and pharma sectors attracted the highest inflows.
• On 26^th May 2022 ONGC said that they will invest Rs 310bn over the next 3 years to explore the basin for oil reserves, this will augment the production of the nation in its attempt to be self-reliant in the energy sector. In this program ONGC is trying to explore ~1700mn tonnes of oil and oil equivalent gas.
• The foreign institutional investors (FII) continued to be sellers and sold equities worth Rs 96,890mn while Domestic institutional investors (DIIs) continued to be buyers and bought equities worth Rs 112,580mn during the week.

Things to watch out for next week

• The report on India’s GDP growth, which is due on Tuesday, will be closely watched by investors. Aṣ India’s economic recovery from the Covid-19 pandemic is expected to have stumbled again in the Jan-Mar period.
• On Monday the US indices are closed on account of the Memorial Day but in the truncated week investors will closely watch the May employment report, monthly vehicle sales, and Federal Reserve’s beige book.
• The 4QFY22 earnings season is coming to an end. The Automobile companies are expected to release the monthly volume data for May, which will be closely watched. The volatility will likely continue next week amidst results, institutional activities, India’s GDP data, and global cues.

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