This week in a nutshell (2nd – 6th Aug)

Technical talks

NIFTY opened the week on 2^nd August at 15,875 and closed on 6^th August at 16,223. This is the highest closing ever for the index. The index made a weekly gain of 2%. On the upside, the index might be headed to 16,650. Based on Fibonacci levels, 16,150 could be an important level to watch on the downside. The next level of support may be at 20DMA of 15,880.

Weekly highlights

• Indian benchmark indices hit record highs on Tuesday amid favorable global cues. Positive domestic macroeconomic data and easing of Covid-19 restrictions further boosted investor sentiment.
• Manufacturing activity in India rebounded to a three-month high in July. The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 55.3 from 48.1 in June, back into the expansion zone.
• Oil prices in Asia fell during the week as worries over China’s economy resurfaced. The rising number of Covid-19 cases in the US and China, the top two importers globally clouded the fuel demand outlook. On Thursday, there was an uptick in oil prices supported by tensions in the Middle East. As of Saturday, Crude Oil WTI was trading at USD 67.9/barrel and Brent Oil was trading at USD 70.3/barrel.
• Auto OEMs reported monthly volume data for the month of July-21. With the gradual easing of lockdown restrictions, there was a pick-up in demand. Demand recovery is expected to accelerate in the coming months due to improving consumer sentiments, faster vaccine rollout, and traction in economic activity. The domestic PV industry volumes increased to 294000 units, representing a 21% CAGR over two years. Domestic 2W volumes were subdued but exports were robust due to healthy demand in geographies such as Africa, and Latin America. The slowdown in monsoon activity in July affected the sowing of Kharif crops led to subdued tractor volumes. Now with the prediction of a normal monsoon and pickup in the pace of sowing, the demand is expected to improve.
• The RBI Monetary Policy Committee has decided to maintain the status quo and kept the interest rates unchanged with an accommodative stance. The repo rate is 4 percent and the reverse repo rate is 3.35 percent. The MPC has retained its GDP growth projection of 9.5 percent for FY22.
• The government introduced a bill to amend the Income Tax Act and do away with the retrospective tax demands. Now no retro tax will be applicable for indirect tax transfer of Indian assets made before May 2012. Companies such as Cairn UK, and Vodafone are beneficiaries of this move. This is a step in the right direction to have a predictable tax regime that will attract foreign investors to India.

Things to watch out for next week

• The quarterly result season continues with companies such as MRF, CAMS, Lupin, and Ashok Leyland reporting earnings next week.
• Investors will get information about the pace of inflation in the US with the release of consumer price index reading and producer price index reading next week. A strong jobs report could put the Federal Reserve on track to announce a tapering of the bond-buying program as early as September.
• The cues from Wall street tend to influence the sentiment on Dalal Street.