DIIs emerge smart buyers as bulls & bears play tug of war

Although investor sentiment on the ground remained cautionary, Nifty50 managed to hold the trend reversal confidently.

This time, the DIIs have come to our rescue and turned net buyers of equities worth more than Rs 9,900 crore in April, signalling their faith in India Inc’s ability to steer through these trying times.

In a never-ending battle of disagreement between the FPIs and DIIs; the overseas international investors have turned away from Indian equities after buying consistently for six months and sold stocks worth over Rs 8,500 crore in the wake of intermittent hiccups due to the second wave of Covid.

Therefore, it will be essential to watch the movement of FPIs and DIIs flows this week. DIIs stole the show and gained dominance. As the USD-INR pair cooled off from Rs 75.5 to 74 a dollar, FPIs may now turn buyers again.

While institutional players were busy deciding their stance on the market, retail investors raised bets on specific stocks looking at the March quarter earnings. Compared with India, the US market seems to be witnessing renewed confidence in its economy amid progress in their vaccination drive, news of further stimulus, recovery in economic activity and solid employment data.

The US Fed held their interest rates at previous levels during the week, and showed confidence in the recovery even though it is far from complete. Their clear message about continuing with their bond purchase programme will add more liquidity to the system, giving comfort to equity investors. This sentiment also trickled down to Indian market, which helped keep investor sentiment high amid concerns over rising Covid cases.

As the US market sustain and hover around life-time highs, the Indian bourses are expected to remain buoyant. Investors can continue with their stock-specific approach with the long-term horizon.

Event of the Week
The dovish stance of the US Fed Chairman on interest rates continued to put pressure on the dollar, as the rupee continued to rejoice for the eighth consecutive day. The gains in the rupee were a pleasant surprise, given the grim Covid situation in the country. Capital flows away from the greenback and support from other Asian currencies was a major reason for the appreciation in our domestic currency this week. The current rupee range of Rs 74-75.5 to the dollar reduces the need for any intervention from RBI at this moment, which will bring about stability in the currency markets and eventually help the bulls on Dalal Street.

Technical Outlook

Nifty50 closed the week positive and rebounded from the previous resistance level, which coincided with the lower end of the rising channel. This may now act as a key resistance on the upside.

ET CONTRIBUTORS

Bank Nifty is also forming a similar kind of pattern with a long upper shadow on the weekly candle. Nifty needs to close above 15,040 level to keep the bullish momentum going. We advise traders to maintain a cautiously bearish outlook as long as Nifty trades below the rising trendline and keep a strict stop loss below 14,150 level for their long positions.

Expectations for the Week
Equity indices are expected to be driven by two key factors – earnings and fresh Covid restrictions – in the week ahead. Volatility may also remain high as the market remains asymmetric in nature; good news can move the needle to some extent, but any bad news can turn out to be extremely brutal as we are trading at frothy valuations. The tug-of-war between the bulls and the bears will continue next week too, and there can be mild corrections in the stocks that have already run up because of strong earnings.

Long-term investors can continue with their investments in marquee names in a staggered manner.

Nifty50 closed the week 2.02% higher at 14,631.