Week Ahead

The market had another spectacular week ending on May 24. The benchmark indices recorded new all-time highs, with the 2 percent rally boosted by select index heavyweights. The rally was driven by better-than-expected March quarter earnings in key segments ahead of the Lok Sabha election results due on June 4. Further, the easing in FII selling, consistent buying by DIIs, RBI's bumper dividend payout, and healthy domestic macro data including record rise in exports, also supported the sentiment.

The Nifty 50 rallied 2 percent, or 455 points, to 22,957, and the BSE Sensex gained 1,404 points, or 1.90 percent, at 75,410, while the closing of the broader markets was mixed, with the Nifty Midcap 100 index rising 1 percent, and the Smallcap 100 index falling 0.7 percent.

The mood is expected to remain upbeat, albeit highly volatile, as the market approaches the exit poll as well as the general election results.

The March quarter earnings season is entering its final week, and more than 2,100 companies will release their results in that period. The important companies to watch will be Tata Steel, Life Insurance Corporation of India, Indian Railway Catering and Tourism Corporation, Astrazeneca Pharma, Natco Pharma, National Aluminium Company, NMDC, Aditya Birla Fashion and Retail, Amara Raja Energy & Mobility, Aster DM Healthcare, Engineers India, Exicom Tele-Systems, and General Insurance Corporation of India.

In India, foreign institutional investor (FII) activity will be one of the important factors to watch next week. FII selling has slowed down as they turned out to be net buyers (to the tune of Rs 1,165 crore in the cash segment in the truncated week ending May 24) for the first time, after being net sellers for several weeks. We believe that FIIs may be big buyers in the coming days if they see policy continuation after the general election results.

Technical indicators suggest possible continuation of the positive mood in Dalal Street next week. Considering the long bullish candlestick pattern and higher high-higher low formation on the weekly charts, along with positive crossover in the RSI (Relative Strength Index) momentum indicator at 67.26, the Nifty 50 is expected to hit the upper band of the rising channel (placed at 23,100-23,200) in the coming days. Sustaining above the same can take the index to 23,500, with key support at around 22,800-22,700 levels.