Weekly Return 25 July

Sensex rallies 3% in a week; over 30 stocks in BSE 500 rose 10-30%

A strong week for Indian markets with bulls under control in four of the five sessions. The S&P BSE closed above 38,000 and the Nifty closed below 11,200 levels.

The S&P BSE Sensex ended 3 percent higher, while the Nifty 50 gained 2.6 percent in the week ended July 24, compared to the S&P BSE Small-Cap Index rise of 1.4 percent, while the S&P BSE Mid Cap Index gained 1.2 percent.

33 stocks in the S&P BSE 500 index rose 10-30 percent. These include Trident, The Federal Bank, RIL, Eicher Motors, Emphasis, Granules India, AU Small Finance Bank, and VA Tech Wabag.

The Nifty 50 closed in the green for the sixth week in a row, recognizing the strong trend seen in global markets and strong earnings from India Inc., while experts suggest that the COVID-19 cases and the US-China tensions, as well as the July F&O deadline, could overturn the markets in the coming week.

The market also tracks the revenue statements of top companies like RIL, SBI, IOC, and Bharti Airtel.

“In the coming week, schedule derivatives expiry of July month contracts combined with the on-going earnings season would keep the volatility high. A long list of prominent names like Kotak Bank, Tech Mahindra, Bharti Airtel, Ultratech Cement, Dr. Reddy, Maruti, HDFC, RIL, IOC, and SBI will be announcing their numbers during the week along with several others,” Ajit Mishra, VP Research, Religare Broking said.

“Apart from the above events, global cues and updates related to the COVID-19 will also be on the participants’ radar,” he said.

In terms of sector performers – the S&P BSE Energy Index rallied over 9 percent, followed by consumer durable and banking stocks.

Among the losers, the S&P BSE Telecom Index fell 1.6 percent, while the FMCG fell 1.2 percent.

Sectoral gainers

Banking and financial services stock, a major component of the Nifty, contributed somewhat to the one-way rally we saw in the markets during the week. While strong results from HDFC Bank and Axis Bank helped the sentiment, management commentary on the suspension also helped sentiment.

“Management commentaries from banking stalwarts on moratorium indeed sounded promising with a caveat that there could be a likely turnaround slowly,” Umesh Mehta, Head of Research, Samco Group said.

“Financial services have also witnessed people staying indoors transacting digitally to procure insurance policies for their loved ones. The fact that more people are working from home is giving them time to trade and invest. Which is working well for D-Street and driving the rally in certain stocks,” he said.

What should investors do?

The Nifty 50 trades close to its key resistance levels; Therefore some consolidation or profit taking cannot be ruled out. The immediate target of the index is around 11,400 levels and the Nifty should use anything to buy as long as it is above 11,000-10,900.

“We maintain our positive stance with a target of 11,400. Whereas we expect midcap and smallcap space to catch up and outperform the benchmark in the coming weeks,” Dharmesh Shah, Head – Technical, ICICI direct said.

“We believe, Nifty has formed a higher base around 10,900 marks and we expect it to hold it in the coming week. We expect a catch-up activity to be seen in the broader market as constant improvement has been observed in market breadth,” he said.

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