Trends in SGX Nifty indicate a gap-up opening for Indian indices

Indian markets could open higher in line with higher Asian markets today and sharply positive US markets on Friday, said Deepak Jasani, Head-Retail Research, HDFC Securities.

Nifty gained for the second consecutive week rising 0.53 percent for the week. Sentiments seem to have turned for the better over the past two days. A move above 16,414 could take the Nifty swiftly to 16,624 and later 16,825. However the 16,006 support needs to be protected, added Jasani.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd, said, Key local benchmark indices are likely to extend gains in early Monday trades mirroring recovery in other Asian gauges following a sharp rally in the US markets on Friday. Benchmark Nifty has room to run further and could reclaim its psychological 17,000-mark. However, the said ‘relief rally’ is unlikely to last long amid the risk of recession fears and the rising inflation levels across the globe.

"Technically speaking, bears may turn bulls if Nifty closes above its biggest hurdles at 16657 mark. The FII camp continues to be the biggest negative catalyst for Dalal Street. FIIs have sold shares worth Rs. 53,791 crores in the month of May and most importantly, have pulled out to the tune of Rs. 221,000 crores from the Indian markets in the first 5 months of 2022," he added.

Nifty built on gains of the previous session on May 27. At close, Nifty was up 1.18 percent or 190.8 points at 16360.9.

Asian stocks opens higher

Asian stocks followed Wall Street higher on Monday as investors wagered on an eventual slowdown in US monetary tightening, albeit after sharp hikes in June and July. Helping to mellow the mood was news that Shanghai authorities will cancel many conditions for businesses to resume work from Wednesday, easing a city-wide lockdown that began two months ago.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent to a three-week high. Japan's Nikkei climbed 1.3 percent and South Korea rose 0.9 percent. Nasdaq futures added another 0.4 percent, after gaining 6.8 percent last week, while S&P 500 futures firmed 0.3 percent , having rallied 6.6 percent last week in their best week so far this year.

US stocks close sharply higher

US stocks ended sharply higher Friday, with all three major benchmarks booking weekly gains, after the Federal Reserve’s preferred measure of inflation for April had the smallest increase in a year and a half.

For the week, the Dow gained 6.2 percent, breaking an eight-week stretch of losses that was its longest since 1932, according to Dow Jones Market Data. The S&P 500 booked a weekly gain of 6.6 percen while the Nasdaq climbed 6.8 percent, each snapping seven straight weeks of declines. Both the Dow and the S&P 500 booked their largest weekly percentage gains since November 2020.

Meanwhile, the University of Michigan’s gauge of consumer sentiment fell to a final May reading of 58.4 from the initial reading of 59.1 earlier in the month, its lowest level in more than 10 years. Consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.9 percent last month. A key measure of US inflation rose just 0.2 percent in April to mark the smallest increase in a year and a half, aided by lower gasoline prices. There were additional hints that a surge in US. inflation might be abating. The increase in the so-called personal consumption price index, or PCE, was its smallest since November 2020. What’s more, the rate of inflation over the past year slowed to 6.3 percent in April from a 40-year high of 6.6 percent in the prior month. It was the first decline in a year and a half.

Global equity funds saw inflows in the week to May 25 for the first time in seven weeks, according to Refinitiv Lipper.

The May employment report Friday is the most important data on a calendar that also includes ISM manufacturing, job openings data, monthly vehicle sales and the Federal Reserve’s beige book, all on Wednesday.

China to announce PMI tomorrow

China is set to announce its official manufacturing Purchasing Managers’ Index for May on Tuesday, with investors looking for clues on the economic impact of Covid-related lockdowns on the mainland.

US markets closed today

US financial markets will be closed on Monday due to Memorial day holiday.

Crude prices rise to two-month high

Oil prices rose to two-month highs on Monday as traders waited to see if the European Union would reach an agreement on banning Russian oil ahead of a meeting (scheduled on Monday and Tuesday) on a sixth package of sanctions against Moscow for its invasion of Ukraine.

On Monday morning, Brent crude futures gained 0.4 percent to $119.89 a barrel while WTI crude futures rose 0.5% to $115.67 a barrel, extending solid gains from last week.

Oil prices rose to two-month highs on Monday as traders waited to see if the European Union would reach an agreement on banning Russian oil ahead of a meeting on a sixth package of sanctions against Moscow for its invasion of Ukraine.

Crude oil prices also gained due to U.S. summer driving season demand and short supply in the international markets. The U.S. summer driving demand rises due to memorial day weekend and supported global oil prices.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We expect crude oil prices to remain strong in today’s session. Crude oil is having support at $112.50-$110.40 and resistance at $117.40-$119.95, In INR terms crude oil has support at Rs 8,850-8,680, while resistance is at Rs 9,050–9,170".

Dollar to remain volatile

The Indian Rupee was volatile and closed virtually unchanged losing 1 paisa or 0.01 percent to close at Rs 77.56 to the US Dollar.

The dollar index showed very high volatility and fall second straight week as traders discounted Fed rate hikes. The dollar index was settled on a weaker note at 101.653 with a loss of 0.20 Rahul Kalantri, VP Commodities, Mehta Equities Ltd on Friday. The USD-INR June 28 futures contract was also settled on a slightly positive note at 77.83 with a gain of 0.01 percent on Friday. The dollar index edged lower and fall second straight week in a row after market and traders discounted Fed rate hikes. Improving inflation consumer spending data also eased fear of recession. The dollar index also falls after gains in the riskier currencies and gains in the global equity markets.

The US economic data released last week was slightly disappointing but improvement was shown in the inflation and consumer spending. However, higher global energy prices continue to keep global inflations higher. We expect the dollar index to remain volatile in this week and could hold its support level of 101.20 on a closing basis. On the other hand, the rupee traded sideways last week. A rupee is unable to show strength despite weakness in the dollar index and gains in the domestic equity markets. A rupee is struggling due to rising domestic inflation amid higher global energy prices.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We expect the rupee to remain volatile this week and could hold its major support level of 78.10 against the U.S. dollar. Looking at the technical set-up, a pair only sustain above 78.00 would show further strength else it could revisit its support level of 77.45-77.30 again.

Bullion outlook

The last two weeks have been bullish for Gold and Silver, a stark difference from the first week of May where bullions fell more than expected. This is partly due to the USD finally taking a breath in its first signs of weakness this year. If the US Dollar continues to fall then we might see this as the beginning of another uptrend for gold.

Gold and silver could be seen reversing their trends, with bullions trying to break into to the upside in morning trades by hovering above their resistance levels. In this week, the key to watch is will the gold ends above $1867 and silver closes above 22.40? Silver renews intraday top past $22.00, extending the previous two-day uptrend, as buyers cheer softer US dollar and technical signals to keep the reins during Monday’s sluggish session.

Moving on, a light calendar and a bank holiday on monday in the US may restrict gold’s immediate moves. However, risk catalysts will be important to watch for fresh impulse, which in turn highlight headlines from Russia and China. Above all, this week’s US jobs report for April may also help in turn could weigh on gold and silver prices.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, Gold has support at $1838-1824, while resistance at $1862-1874. Silver has support at $21.72-21.48, while resistance is at $22.30-22.55. In INR terms gold has support at Rs 50,740–50,510, while resistance is at Rs 51,180–51,350. Silver has support at Rs 61,180-61,650, while resistance is at Rs 62,680–63,110.

Results today

The following companies will release their quarterly earnings today: Life Insurance Corporation of India, Jubilant Foodworks, Sun Pharma, Aurobindo Pharma, Campus Activewear, IRCTC, Coffe Day Enterprises, LT Foods (Daawat), Dilip Buildcon, DCM Shriram Industries, Delhivery, Dhampur Sugar, Dhani Services, Dish TV, Dixon Technologies, Dredging Corporation of India, Eureka Forbes, Jindal Steel & Power, Lux Industries, Mazagon Dock Shipbuilders, Mawana Sugar, Mcleod Russel, Medplus Health, Natco Pharma, Prudent Corporate Advisory Services, Radico Khaitan, SpiceJet, Stove Kraft, and Wockhardt will be in focus ahead of March quarter earnings.

(With inputs from Reuters and Agencies)

Published on: Monday, May 30, 2022, 08:38 AM IST