India’s Nifty upside bias remains

The Reserve Bank of India (RBI) kept its main lending rate unchanged yesterday, amid a choppy trading session in the local stock markets.

India stock exchange board
Source: Bloomberg

The key interest rate was left at 8%, untouched for the fourth consecutive time. The central bank said this was due to increased risks caused by inflation and the difficult external situation, especially on the geopolitical front. 

The decision was largely in line with market expectations, but profit-taking appeared to put a lid on any gains. After a bit of a rollercoaster session, India’s benchmark indices closed flat from the previous day.

The Nifty, or India 50 Cash, had drifted above the psychological 8,000 level during the afternoon trade but failed to hold on to those gains. This was largely due to a drag from interest rate on sensitive stocks in the banking and property sector, which were weighed down by the RBI rate decision.

The central bank’s bi-monthly review coincides with the wrap up of India Prime Minister Narendra Modi’s US visit. From the surface, it looks like a rather productive trip which set up a closer working relationship with the US.

Looking at the Nifty, we expect the bias to remain on the upside as long as it does not go below last week’s low of 7,928 points. The stock has been following an uptrend line since May. If the upward bias continues, it is likely to respect this line as a support level.

Ahead of the India Open

We are calling for the Nifty or India 50 Cash top open largely flat at 7,936 points.

A bounce should see it test a resistance of 8,180 points, which is also its all-time high. On the flipside, if it breaks below the support level of 7,900 points, it could signal the end of the trend and a possible breakout south toward the 7,500 point area.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.