Week in a Nutshell (20-24 June)

Technical talks

NIFTY opened the week on 20th June at 15,334 and closed just below 15,700 on 24th June. The index is trading near the lower Bollinger Band level of 15,370 which might act as a support, although a weak one as the markets have been falling for the past three weeks. On the upside, the 16,200 level might act as a resistance, since a gap was made last week. The RSI (14) at 40 has been consistently coming down.

Among the sectoral indices, AUTO (+6.9%), CONSUMER DURABLES (+4.6%), and FMCG (+4.2%) were the gainers during the week. METAL (-2.7%) was the only loser.

Weekly highlights

• All the major US indices have risen from 5.4% to 7.5%, a recovery after two weeks of continuous selling.
• The WTI Crude oil fell 1.7% and Brent Crude closed flat for the week after worries about the US economy going into a recession, which means lower oil demand.
• The minutes of the RBI MPC meeting got released this week. The rate-setting committee has indicated of further rate hikes are on their way as inflation has been consistently staying above the upper tolerance band of 6%. The RBI has the mandate to control inflation and let it stay at 4% +/- 2%. Hiking or lowering interest rates is one of the prominent tools to control inflation.
• Another update related to RBI is the fall in forex reserves that the RBI maintains. The latest data released by the RBI report shows that the foreign currency reserves have fallen by USD 10 bn in the last two weeks as the RBI has stepped up intervention in the foreign exchange market. The RBI has been selling dollars to curb excessive volatility in the exchange rate and prevent runaway depreciation of the Indian rupee. The forex reserves with the RBI now stand at USD 590bn. The rupee has been depreciating against the dollar and now trades below ₹78.2/USD.
• The government, from July 1 will ban 22 single-use plastic products such as plastic spoons, forks, plates, etc. Within that also falls plastic straws that come with tetra pack juices, milkshakes, and buttermilk. Manufacturers of such products including Amul, Parle Agro, Dabur, etc are pleading with the government to postpone the ban on straws as an alternative which is paper straws which are largely imported and they cannot be made available in a short span.
• After a scare of a few electric two-wheelers catching fire, this week in Mumbai, a TATA Nexon EV car caught fire while parked. Now even though many EV manufacturers are saying that a small percentage of EVs catching fire is normal and is a global phenomenon, it will still create a negative sentiment in the minds of the prospective customers of electric vehicles.
• However, good news for internal combustion engine (ICE) vehicles that run on traditional fuels like petrol, diesel, and CNG. Many manufacturers are about to launch their newer models and variants as we approach the monsoon and subsequently the festival season. Multiple test vehicles, covered in camouflage have been located by auto enthusiasts. This has always been a strong indication that upcoming launches are expected very soon.
• FII (Foreign Institutional Investors) net sold ₹ 1,15,116 mn and DII (Domestic Institutional Investors) were net buyers this week. DIIs bought shares worth ₹ 1,16,704 mn.

Things to watch out for the next week

• At the beginning of the month, economic data watchers will look for GST collection data, and in addition to that, stock market watchers will look for monthly automobile sales volume data. Automobile, a sector that contributes 7% to the GDP and creates big employment opportunities, a consecutive and steady recovery is essential for the economy.
• The G7 Summit will be held in Germany on Monday. The leaders will likely discuss rising worldwide inflation and the post-war scenario in Russia, Ukraine, and the European Union.
• The US economy had contracted 1.5% in the January to March 2022 quarter. A consecutive decline in the quarter ending June will officially make the US economy to enter into a recession. Hence, the quarterly GDP numbers to be released on June 29 will be keenly watched.

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