MARKET OUTLOOK & VIEW ON RBI CREDIT POLICY ON 06 TO 8 JUNE 2022

The market rally is showing signs of further extension, supported by mid and small caps. High-frequency data such as GST survey and PMI have shown a good start to FY23. Crude oil prices have declined, giving an advantage to the performance of the Indian market. We expect the RBI to hike the repo rate another 35-40 basis points at the June meeting. However, we won't be surprised if they choose to take rate hikes slowly as the government is also reacting to inflationary risks. The recent announcement of fuel tax cuts and cuts in import tariffs on cooking oils will offer some consolation to the RBI. RBI's surprise CRR rate hike earlier in the month has fueled expectations of another CRR rate hike in June policy. However, excess liquidity in the banking system has fallen sharply over the past three weeks. Currently, the net excess liquidity parked under the RBI's LAF window is close to Rs. 3 trillion. We believe RBI will be comfortable with this level of liquidity at this point. Therefore, it can leave the CRR rate unchanged. The bond market is already positioned for early rate hikes. The broader market expectation is that the RBI will rise by around 40-50 basis points at the June meeting. Any small rate hike will be a positive surprise and short-term bond yields could fall slightly. However, much will depend on central bank policies in India and the US, which will be announced in the next two weeks. Nifty is expected to remain range bound while Bank Nifty could outperform. Traders are advised to use a buy-on-decline strategy in the support zones. At this point in time, we recommend selective stocks.

VIEW ON MARKET FOR THE WEEK AHEAD

Due to the spectacular run of the last 2 years, equity markets had moved into fair valued territory earlier this year, bringing the allocation of equities in investor portfolios closer to their strategic allocation limits. Over the past 12 months, we have been cautious about equities as an asset class given the high valuations. However, since the beginning of the year, markets have corrected concerns about Omicron's impact on the growth recovery due to the war in Ukraine, and higher inflation and interest rates dampening investor sentiment. Additionally, these upheavals have also impacted bottom growth, with recent data suggesting that India's economic growth slowed to 4.1% in the fourth quarter of FY22 and estimates for full-year FY22 GDP growth of an estimated 8.9% were lowered to 8.7% in February. Markets have corrected over the past 6 months and participants are now quick to include the implications of high inflation and the rising interest rate scenario. We believe markets are likely to remain volatile. Against the backdrop of such a landscape, investors should exercise discipline in asset allocation and take advantage of volatility by building equity positions at attractive valuations.

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NIFTY BANKNIFTY OUTLOOK FOR F&O JUNE SERIES 2022

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A rollercoaster week for investors, but the bulls were able to gain the upper hand. Benchmark indices closed with handsome gains. Benchmark indices such as the Nifty and Bank Nifty managed to hold above the previous swing lows of 33,000 and 15,700 respectively, before trading in a range thereafter. Much of the May series witnessed strong pressure for both benchmark and sector indices. However, towards the end of the series, the indices rallied, one has to wait for confirmation to come to a conclusion.The first week of the June series is expected to remain volatile as the Nifty may fail to stay above 16425 levels. Options data suggests that 16000-16200 is likely to act as an immediate area of ​​support. Once the index closes above 16425, it can quickly test the 16550 to 16650 levels. Once the index closes above 16,420, it can quickly test 16,600-16800 levels. Outlook for June series remains range bound to slightly positive until Nifty trades above 15800. This is where the 89 week EMA and Ichimoku cloud support will be placed. Once the Nifty closes above 16425 levels, it can see another boost towards 16600-16800 levels. Bank Nifty saw strong outperformance towards the end of the series, led by improved performance from heavyweights like HDFC Bank, Kotak Mahindra Bank, ICICI Bank, and Bank Nifty saw strong outperformance towards the end of the series, led by improved performance from heavyweights like HDFC Bank, Kotak Mahindra Bank, ICICI Bank and Axis Bank. The structure of these stocks remains strong and dips are expected to be bought. However, the index has moved well above its immediate breakout area of ​​35000, suggesting momentum is cooling near 34500. Traders can keep IndusInd Bank on the radar. The stock is currently consolidating and a close above Rs 930 will open avenues to Rs 980-1000 levels.

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