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What should investors do on Tuesday? Will RBI cut rates post CPI data?

July 13
22:02 2020

There were no Monday blues on D-Street, but it was a volatile day of trade as the Nifty moved in a 100-points range throughout the trading session. The index faced resistance near its 200-day moving average (DMA) placed at 10,885 for the sixth consecutive session in a row.

The Nifty finally found support near its five-day Exponential Moving Average (EMA) placed at 10,756 and managed to close above 10,800 levels. The market closed in the green, but experts feel that the moved lacked conviction and investors should ideally lighten positions.

There are no sell signals which got generated, but sharp selling seen in the banking index could slow momentum, experts told Moneycontrol.

Fear of extension of the EMI moratorium period and also decline in the HDFC Bank stock, which is part of the Nifty, Sensex and Bank Nifty, on reports of improper lending by its vehicle finance unit kept sentiment uncertain throughout the day, a market participant said.

The Nifty appears to have witnessed profit booking from its intraday high of 10,894, after opening gap up, as it tested its 200-day simple moving average whose value is placed at 10,885 levels.

“This price action resulted in a bearish candle on intraday charts, thereby dissipating the enthusiasm of bulls as they made a failed attempt for a range breakout. The trajectory of the market will continue to remain directionless unless the Nifty registers a strong close above 10,900 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

For the time being, traders will be better off focusing on stock-specific opportunities rather than betting on a trendless index, he added. “On such a breakout, long positions shall be considered with a target placed around 11,250 levels. On the downside, a breach of 10,676 will confirm the weakness. On such a breakdown, the index can be eventually dragged down towards 10,450 levels.”

The Bank Nifty closed 1.3 percent lower at 22,089 levels. It has been underperforming the Nifty for the last two trading sessions, with some build-up in short positions in the futures segment.

“Banking heavyweights have started correcting from higher levels and showing initial signs of weakness,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, told Moneycontrol.

“Now a hold below 22,500 could see profit booking towards 22,000-21,750 levels. On the upside, the key hurdle exists at 22,750-23,000 levels,” he added.

Will RBI cut rates post CPI data?
Consumer inflation data after market hours on July 13 came in higher than estimates. The headline number, which was released by the Central Statistics Office (CSO) after a gap of three months, posted a negative surprise, at 6.1 percent for June.

But experts feel that the Reserve Bank of India (RBI) will continue with its rate-cutting cycle.

Aditi Nayar, Principal Economist, ICRA, expects an asymmetric cut of 25 bps in the repo rate and 35 bps in the reverse repo rate at the Monetary Policy Committee’s (MPC) next policy meeting.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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