Nifty may consolidate between 5,300 and 5,600 until expiry
The sharp fall in crude oil prices is likely to limit the downside risk for Indian shares this week, but gains will be capped due to lingering concerns over euro zone debt.
The National Stock Exchange (NSE) benchmark Nifty is likely to consolidate in the range of 5,300 to 5,600 until the expiry of derivative contracts on June 30, market experts say. On Friday, the 50-stock index had gained 2.84 per cent to close at 5,471.25.
“The market is still not out of the woods,” said Devang Mehta, vice-president and head of equity sales at Anand Rathi Financial Services. “The sharp fall in crude oil prices is a positive, but euro zone debt concerns are still there,” he added.
Brent crude for August dropped nearly seven per cent last week after the International Energy Agency on Thursday agreed to release 60 million barrels of emergency crude supplies.
Falling crude oil prices is good news for India, which imports three-fourths of its oil requirements. It lowers inflation and reduces the government’s subsidy burden.
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To tame soaring inflation, the Reserve Bank of India has raised key policy rates 10 times since April 1, 2010. Wholesale-price inflation for May increased to 9.06 per cent from 8.66 per cent in April.
“There does not seem much downside for the market from present levels. Last Monday’s crash should be the bottom,” said Deepak Mohoni, founder of Trendwatch (India), who predicts market movements based on technical analysis. “Stock prices are attractive and it is a good time to buy,” he added.
The Nifty had touched a low of 5,195.90 last Monday on reports the government was reviewing a tax treaty with Mauritius.
Market participants are also enthused by the government's move to increase prices of diesel, liquefied petroleum gas for domestic use and kerosene sold under the public distribution system. "It shows the government has now started to take some action," Anand Rathi's Mehta said.
The euro zone debt crisis is also expected to weigh on Indian shares next week. On Friday, major US stock indices had ended lower on worries about the Italian banking sector and Greece’s debt crisis.
The Dow Jones industrial average lost 0.96 per cent at 11,934.58, the Standard & Poor's 500 index closed down 1.17 per cent at 1,268.45 and the Nasdaq Composite index shed 1.26 per cent to close at 2,652.89.
Global investors are anxious about the developments in Greece and fear the country's government may fail to pass an austerity plan this week, which could force a default on its debt repayments.