NIFTY MAY SEE EXHAUSTION AT 25550 BROADER MARKET TO REMAIN SIDEWAYS TO SLIGHTLY POSITIVE

Dated: 31/08/2024

Another week another ATH in the Nifty August has been a roller coaster ride for bulls & bears where Nifty rise back from the dungeons & ending politely supported the bulls with another ATH on Dalaal Street with high’s of 25268.85 with ATH closing at 25235.90. With bulls to once again outperformed Nifty is all set to roar in September as well but with sideways to positive move but some exhaustion may come around 25550 & either first or second week of the September series could get hampered.

As earlier anticipated Nifty not only tested our target of 25200 last week but this was certainly support by our mentioned heavy weights like HDFC Bank, Kotak Bank, Reliance Industries etc. While the downward move remained restricted at 24000 on a closing basis.

Nifty continued its bullish momentum by not only making another bullish bar for the last three consecutive on Weekly charts but also on monthly charts as well. Though this denotes the bullish momentum to continue to in September series as well but initially 25550 could act as exhaustion & in first or second half of the week could witness profit booking which could show us 24800-24500 kind of levels. However this time sector specific movement could possibly be seen.

In the wholesome broader markets witnessed some key events & their outcomes last week which are described as follows:

1. RBI’s Focus on Fintech Regulation: The Reserve Bank of India (RBI) emphasized the need to balance fintech innovation with prudence. This is part of its broader effort to regulate and support the rapidly growing fintech sector in India​

2. During Reliance Industries’ 47th Annual General Meeting (AGM) on August 29, 2024, Mukesh Ambani outlined several ambitious goals for the company. Key highlights included:

3. Retail Expansion: Reliance aims to double its retail business in the next 3-4 years. The retail arm recorded gross revenue of ₹3.06 lakh crore ($36.8 billion), with strong growth driven by expanding into smaller towns and adding new stores. The company plans to continue this trajectory with an emphasis on affordable, high-quality products​.

4. New Energy Ventures: Reliance is heavily investing in bioenergy and solar energy. Ambani emphasized the strategic importance of the New Energy business, predicting that it will grow to be as significant as the Oil-to-Chemicals (O2C) business over the next 5-7 years. The company is on track to produce its own solar photovoltaic modules by the end of 2024.

5. AI and Technology: The Company is transforming into a deep-tech enterprise, focusing on artificial intelligence (AI) and advanced manufacturing. This shift is part of a broader strategy to place Reliance among the top 30 global companies.

6. Fiscal Deficit: India’s fiscal deficit stood at ₹2.77 lakh crore, which is 17.2% of the full-year target for FY25. The government aims to reduce the fiscal deficit to 4.9% of GDP for FY25, down from 5.6% in FY24.

7. GDP Growth: India’s GDP growth rate for Q1 FY25 moderated to 6.7%, down from 8.2% in the same quarter of FY24. This deceleration is attributed to a high base effect and some economic challenges; although sectors like construction and manufacturing continue to show strong growth.

8. Outlook: Despite the slowdown in growth, economists maintain a positive outlook for the year, projecting overall GDP growth around 7% for FY25. Private consumption and investment are expected to support this growth, while inflation remains a key area of focus.

International

1. Global Central Bank Actions: Central banks in major economies signalled upcoming rate cuts, as inflation concerns have begun to subside. The U.S. Fed, European Central Bank, and Bank of England all hinted at potential rate reductions due to weakening labour markets and slowing growth​

2. China’s Economic Slowdown: China’s Manufacturing and Non-Manufacturing PMI data, set for release on August 31, are expected to indicate further economic contraction, which could negatively impact global markets, particularly in commodities like crude oil​

3. Australia: Australia’s Consumer Price Index (CPI) was anticipated to show a decline, which may lead the Reserve Bank of Australia to adopt a more dovish stance on monetary policy​

4. S. Federal Reserve and Interest Rates: Fed Chair Jerome Powell hinted at potential rate cuts in September, marking a significant shift from the current 5.25%-5.50% rate. This move is supported by growing confidence that inflation is trending back towards the 2% target​

5. European Central Bank (ECB): In the Eurozone, inflation is easing, particularly in the services sector. The ECB is likely to continue cutting interest rates in the coming months as wage inflation slows and economic data weakens​

6. China’s Economic Policy: China is focusing on boosting domestic demand due to economic slowdown, particularly in the private sector. The government is likely to implement measures aimed at improving consumption and supporting private sector investment.

However, “Nifty IT” our most beloved sector has almost completed our August series target of 43000 mark by making high’s of 42893.65 to give a close at 42787.80. In the coming week ahead we remain neutral for the “Nifty IT” any dip towards 40000 now if comes remains a good buying opportunity with now upgraded target of 45000 in September series. However with expectations of continuous outperformance by “Nifty IT” now remain neutral in first or second week of the series but in September series we continue to expect it to test 45000 mark. However, we have already raised our positional target of 53000 in “Nifty IT” till March 2025 with volatilities in between the roads ahead & the second half of the 2024 is going to be of “Nifty IT” broadly. In the between the heavy weights like TCS Infosys & Wipro may continue to remain into focus.

Advance tax collection in FY till June 15 surged 27.6% to ₹1.48 lakh crore, with ₹1.14 lakh crore as corporate tax and ₹34,362 crore as personal income tax, indicating a strong economy and corporate performance.

The Centre’s gross tax collections (post refunds but before transfers to states), stood at Rs 4.6 trillion in the first two-months of the current financial year, 15.9% higher than the year year-ago level, data released by the Controller General of Accounts (CGA) showed on Friday. This is against 10.6% annual growth pegged in the Budget for FY25.

Net tax revenue (after refunds and after devolution to states) during April-May, stood at Rs 3.19 trillion, accounting for 12% of the Budget estimate of Rs 26.02 trillion. However, during the same period of FY24, net tax revenue had accounted for about 16% of the Budget target.

Institutional players were net biased on each factors last week. When FII’s continues now turned net buyer with net inflow of  Rs.9,217.19 cr. last week while DII’s continued to remain net buyer’s with net further inflow of Rs.1,198.27 cr.

Nifty last week remained highly positive by making another ATH of 25263.85 to give a close at 25235.90 with net gain of 412.75 points i.e. net gain of 1.66% for the week. Nifty now has made bullish bar not only on three consecutive weekly charts but also on monthly charts. This momentum flow has expected continuous upside but the exhaustion may come around 25550 while on the downside in case profit booking comes could be potential towards 24500-24800 kind of levels. Overall the September series remains bullish on a positive nod. However, this time the sector specific rotation is on the cards which could be supported by different sectoral rotations. Specialty chemical sector could remain into focus for the week along with Sugar sector.

Sensex too has managed to make another ATH in August series by making high’s of 82637.03 to give a close at 82365.77 with net gain of 1206.79 points i.e. 1.48% for the week. Sensex too made bullish bar not only on weekly charts but also on the month charts which denotes the bullish mode could continue to remain in September series but some profit booking looks inevitable at 83700-84000 kind of levels in first or second week of the September series which could take it towards 80000 kind of levels. However, this time the sector specific rotation is on the cards which could be supported by different sectoral rotations. Specialty chemical sector could remain into focus for the week along with Sugar sector.

Bank Nifty however remains bullish only above 51500 while any drag towards downside could take it towards potential target of 49600-48000 kind of levels. While any close on or above 51500 could take us towards 52000-52800 kind of levels. Mid-cap private banks are like RBL Bank, Bandhan Bank etc. are likely to outperform along with certain PSU large caps like SBI & Bank of Baroda may support the upmove (if any).

In Nifty Financial Services may continue to have its cruial support levels of 23000-23200 with potential upside target of 24000 kind of levels.

In the “Nifty IT” we have almost archived our August series target of 43000 mark by making high’s of 42893.65 to give a close at 42787.80. In the coming week ahead we remain neutral for the “Nifty IT” any dip towards 40000 now if comes remains a good buying opportunity with now upgraded target of 45000 in September series. However with expectations of continuous outperformance by “Nifty IT” now remain neutral in first or second week of the series but in September series we continue to expect it to test 45000 mark. However, we have already raised our positional target of 53000 in “Nifty IT” till March 2025 with volatilities in between the roads ahead & the second half of the 2024 is going to be of “Nifty IT” broadly. In the between the heavy weights like TCS Infosys & Wipro may continue to remain into focus.

Till March 2024 the number of Demat Accounts has risen to whopping 14.39cr. which not only helps the capital markets directly but also directly to Equity investments.

In the FY 2023-24 so far the Direct Tax collection has amounting to whopping Rs. 18, 90,259 cr. has seen the surge of nearly 19.88% as compared to its previous year collection of Rs. 15,76,776 cr. .

Brief Levels of Nifty / Sensex/ Bank Nifty / Nifty Financials / Nifty IT:

Nifty CMP:  25235.90
Nifty Immediate Target / Hurdle: 25550
Nifty Immediate Support: 24500-24800

Sensex CMP: 82365.77
Sensex Immediate Target / Hurdle: 83700-84000
Sensex Immediate Support: 80000

Bank Nifty CMP:  51152.75
Bank Nifty Immediate Hurdle / Target: 51500 / 52000-52800 (As the case may be)
Bank Nifty Immediate Support: 49600-48000

Nifty Financial CMP: 23581.70
Nifty Financial Crucial Target: 24000
Nifty Financial Crucial Support: 23000-23200

Nifty IT CMP: 42591.65
Nifty IT Potential Upside: 45000 / 53000 (As the case may be)
Nifty IT Crucial Supports: 40000

Stock on Radar:

Large Caps:

• PNB (CMP 116): A slow moving counter but definitely can form bottom here at CMP 116 with strict SL placed at 110 with potential upside of 134-145 in 3 months time frame.

• SBI (CMP 815): This large cap PSU Bank looks like can support the Bank Nifty in its upmove if any comes. One can accumulate here at CMP 815 with strict SL placed at 790 for an estimated possible upside of 880.

• Bank of Baroda (CMP 250): Another large cap PSU Bank looks good to accumulate here at CMP 250 with strict SL placed at 230 with a potential upside target of 300 in 2-3 weeks time frame.

• Ambuja Cements (CMP 617): This large cap cement giant has shown some profit booking in August series but may show some potential reversal from here onwards. One can accumulate here at CMP 617 with strict SL placed at 570 with potential upside target of 654-670 in September series itself.

• Tata Steel (CMP 152): This large cap metal counter looks like can show some short term upside from CMP 152 towards 180 with strict SL placed at 130.

• Reliance Industries (CMP 3020): Reliance Industries Possibly looking very good for the month. One can accumulate here at CMP 3020 with strict SL placed at 2866 for an estimated possible upside of 3200 in this week & 3500 in 3 months time frame.

Mid- Caps:

• All Cargo Logistics (CMP 70): This mid-cap logistics counter looks good to accumulate here at CMP 70 with strict SL placed at 60 for a potential upside target of 90 in 3 months time frame.

• Easy My Trip (CMP 39.72): This mid-cap tours & travel counter looks good to add here at CMP 39.72 with strict SL placed at 38 for an estimated possible target of 50.

• Anupam Rasayan (CMP 779): This mid-cap speciality chemical counter can form bottom here somewhere at 779 with strict SL placed at 730 with possible upside of 877 within 3 months time frame.

• Infibeam Avenues (CMP 31): Another mid-cap IT counter looks attractive at CMP 31 with strict SL placed at 25 one can expect a potential upside of 40 in no time.

About the Author:

Mr. Vishal Gupta a SEBI Registered Research Analyst is the founder of “VG STOCK RESEARCH”, founder of “THE ANALYSIS ROOM”, a writer & an advisor having rich experience in Indian Equity Markets who has spent years comprehending an industry wide shift and risk management with more than 12+ years exploring in depth analysis of the Equity & Derivatives with accuracy of 90% and above.

He has also been into teaching Fundamental Analysis for quite some time giving investors/traders comprehensive knowledge & skills of Indian Equity Markets.

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