Market consolidation may continue, July looks promising

We expect to see Nifty50 fluctuating in the range of 11,620 to 11,860. The index is likely to test this range in the first half of July contracts while in the second half we may see some higher highs.

The May election results and the polls prior to the announcement filled the public with hopes for a better market scenario, but the effect of the same seems to have faded. The markets had reached a high of around 12,000 on the day of the announcement of the results, but could not sustain this level for long.

June witnessed an opening around 11,940 level, but the Nifty50 was able to touch the 12,000 marks for merely three days at the beginning of the month. This initial activity was again based on monetary rate cuts by the RBI, but the announcements did not seem enough to continue pumping blood into the markets.

Even though the Nifty did not sustain the high this month, the index continued to find support at 11,620. This level has continued as the support level for the index from April.

The lack of activity for June among various other factors could also be due to 34 stocks being dropped from the F&O market by the end of this month as suggested by the notice published on April 22.

Even though we saw the Nifty not able to sustain the high, there are other stocks who too were a party to the downfall this month, namely Yes Bank (-23.3 percent), Indiabulls Housing (-20.3 percent), Glenmark Pharma (-17.5 percent), Equitas Holdings (-15 percent), GAIL (-15 percent) and IndusInd Bank (-10 percent). These were some of the major drivers of the downfall including DHFL (-26.37 percent), which continued its bleeding of eight months.

Particular sector indices such as Nifty Media (-6.93 percent), PSU Banks (-6.19 percent), Auto (-5.8 percent) and Pharma (-5.13 percent) closed with a negative change while Nifty IT (+2.87 percent) and Metal (+1.64 percent) performed well.

The remaining indices, including Nifty FMCG (-2.05 percent), Private Bank (-1.79 percent), Nifty Bank (-1.19 percent), Realty (-0.96 percent) and Financial Services (+0.72 percent), remained flat for the whole month.

The overall performance of the Nifty50 for this month appeared to be slightly towards the negative side and the added negative close on the day of expiry for June F&O is an indication that markets will continue to consolidate for a few more days.

We expect to see the Nifty fluctuating in the range of 11,620 and 11,860. The index is likely to test this range in the first half of July contracts and in the second half, we may see some higher highs.

Though the market has been slightly tilted on the negative side for this month, July contracts seem to be more flat to positive. Additionally, let’s not forget that the 12,000 marks will still be tough to touch and more importantly, to sustain.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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