Technical Analysis- Markets scale a new closing high

Technical Analysis: Markets scale a new closing high

By VK Sharma

Both the Sensex and Nifty rose more than 1% last week and managed to end at a new closing high of 63,384 and 18,826, respectively. Both the benchmarks have now eclipsed the record made on December 1, 2022, when they had closed at 63,284 and 18,812. The all-time intra-day highs, however, are yet to be crossed.

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Biparjoy, a Category 3 storm, which became the longest living cyclone in the Arabian sea has adversely impacted the progress of the monsoon, which was already behind schedule. This will result in late sowing and probably a higher reading of consumer price inflation and less elbow room for the RBI.

Speaking about central banks, the US Federal Reserve delivered a widely expected pause last week but forecast further hikes to come as inflation remained sticky. The Fed now sees its terminal rate at 5.6% at the midpoint in 2023, up from a prior forecast of 5.1% seen in March, suggesting two more hikes remain in the offing. Only one round of inflation and labour market data will be released between now and the July meeting, which shouldn’t be sufficient to establish a trend. Unless the hourly wages rise sharply, the Fed will not walk its talk.

Another factor that investors need to keep in mind is that crude oil exports out of Iran have surged to a five-year high despite US sanctions. The US and Iran seem to be inching toward an understanding to free American prisoners and explore limits on Iranian nuclear research, possibly in exchange for leeway to ship more crude. With Saudis having planned further cuts in oil production from July 1, despite US objections, the US is likely to allow Iran to export more.

Meanwhile, US markets are closed Monday for the Juneteenth Holiday and Chinese markets are shut for Dragon Boat Festival on Thursday and Friday. Japan’s Nikkei notched a fresh three-decade high and its 10th consecutive weekly gain on Friday as investors cheered the central bank leaving its ultra-easy policy settings unchanged. Despite the record rise, the benchmark is still 5,000-plus points short of its all-time high seen in 1989.

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Investors should continue to remain invested confidently in these markets as they climb wall of worries.

The writer has over three decades of experience in the capital markets. He is former head of private clients’ group (PCG) and capital market strategy at HDFC Securities.