By V K Sharma
The markets are going into the Budget fortnight with elan. When FM, Nirmala Sitharaman rises to present her seventh budget on July 23, she will make history as her tally would be the largest for any FM in India. She had already equalled Morarji Desai’s record of six budgets.
The markets closed the trading week at a new all-time closing high of 24,502 on Friday. This is the sixth week on the trot, when the Nifty has scaled a new peak. The Large caps continue to do well, while the mid and the small caps are catching their breath.
The Nifty IT Index, which had grossly underperformed till April, has risen over 21% since April 30. A fifth of those gains have come on a single day, Friday. The IT benchmark is now just 227 points or 0.5% below its all-time high mark of 39,446 registered on January 4, 2022. Railway stocks have run ahead of the budget and shipping stocks have zoomed in anticipation of a new shipbuilding and repair policy announcement.
As the markets continue to rise, the bourses too are taking risk mitigating measures. The NSE Clearing has revisited its criteria for accepting stocks as collateral for margin funding based on higher liquidity and lower impact cost. As a result, of the 1,730 firms now eligible, only 720 have passed the test. The new guidelines will take effect from August 1 in a phased manner. These outgoing stocks saw a knee jerk reaction when the circular came out. But the impact will be felt more in the future when the circular is implemented.
The recommendation of the expert committee on Future & Options appointed by SEBI, which calls for increasing the lot size and restricting weekly contracts to just one per exchange have also caused a mild panic in the markets. But these are mere recommendations and will now go to the Secondary Market Committee of SEBI and if accepted, will be then implemented. Monsoons, which had played truant are doing better. The precipitation deficiency has reduced to 3% as on July 12. The kharif crop sowing is up by 14% as compared to last year. More importantly, area under pulse cultivation was up by 50% as of July 8.
The next resistance for the Nifty comes in at 24,610. The main resistance is at 25,395. These figures are 161.8% and 200% retracement of the entire swing from 23,338 to 21,281. Support comes in at 24,141, which is the July 10 Swing Low. It is also the point of upward sloping trendline no 25, in the chart. This should act as a strong support.
(The author is a market veteran with 35 years of experience. He retired from HDFC Securities as Head of PCG & Capital Market Strategy).
