Weekly Wrap: Sensex, Nifty Gain For Second Straight Week; RIL Falls Most In 2 Years On Fuel Export Tax

The Indian equity benchmarks gained for the second straight week for the week ended July 1 but the gains were capped owing to selling pressure in the index heavyweight Reliance Industries Ltd. (RIL). Sensex advanced 0.34 per cent to close at 52,908 and Nifty 50 index rose 0.34 per cent to settle at 15,752.

The indices however posted their worst quarterly performance since the early days of Covid-19. For the first quarter of the current fiscal, Sensex has fallen 9.66 per cent and Nifty fell 9.8 per cent.

Benchmarks reacted violently, grasping Indian as well as global factors throughout the week. Global markets are on shaky ground as the highest inflation in decades, supply-chain shortages and geopolitical tensions weigh on the outlook for growth around the world, says Sumeet Bagadia, executive director at Choice Broking.

The start was upbeat, thanks to favourable global cues, however, most of its gains fizzled out through the course of the week. Tepid global cues and nervousness ahead of the earnings season impacted sentiments. The trend was mixed across sectors which offered opportunities on both sides.

Index heavyweight Reliance Industries came under heavy selling pressure on Friday after the government imposed an export tax on petrol, diesel and jet fuel (ATF) shipped overseas by firms like Reliance Industries and Rosneft-backed Nayara Energy.

The shares of the Mukesh Ambani-led conglomerate fell as much as 8.82 per cent, suffering their biggest single-day fall since March 20, 2020, to hit an intraday low of Rs 2,365.

The imposition of tax will hit oil refiners like Reliance Industries and Rosneft-backed Nayara Energy as they have been making a lot of money by exporting fuel to deficit regions such as Europe and the US in the aftermath of Russia's invasion of Ukraine.

The refiners are said to have processed Russian crude oil available at a discount after it was shunned by the west, and exported fuel produced from it to Europe and the US.

ONGC and Oil India also dropped 13 per cent and 15 per cent respectively as the government also levied Rs 23,250 per tonne additional tax on crude oil produced domestically.

How Sectoral Indices Fared

Nifty FMCG index was the top Nifty gainer, the stock index rose 2.5 per cent primarily led by FMCG major ITC which surged to Rs 285, its highest level in three years. Nifty Metal, Realty, Auto and IT indices also rose between 1-2 per cent.

On the other hand, Nifty Consumer Durables, Oil & Gas, PSU Banks, Private Banks and Bank indices ended lower.
Mid- and small-cap shares outperformed their larger peers as Nifty Midcap 100 index rose 0.5 per cent and the Nifty Smallcap 100 index advanced 1 per cent.

ITC was the top gainer in the Nifty 50 basket of shares, the stock rose 7 per cent to close at Rs 284. Hindalco staged a bounce back by rising nearly 6 per cent. Larsen & Toubro, UltraTech Cement, Coal India, Bharat Petroleum, Britannia Industries, Mahindra & Mahindra and Nestle India also rose between 3-5 per cent.

On the flipside, Bajaj Auto, Titan, ONGC, Reliance Industries, Eicher Motors, Apollo Hospitals and Bajaj Finserv were among the top losers.

The Week Ahead and Technical Setup

Going ahead investors will shift their focus on the first quarterly earnings announcement by Indian companies which will begin with IT major TCS announcing its earnings on July 8. Participants will be closely eyeing its results for any change in the guidance amid the fear of a global slowdown.

On technical charts, Nifty has support at around 15,500-15,410 levels while on the upside 16,000-16,100 may act as an immediate hurdle. For Bank Nifty the support is around 32,800 levels while resistance is at 34,500 levels, says Bagadia.

He advises that there can be a pullback rally in the benchmarks. “Lower Bollinger band in daily time frame indicates minor pullback rally expected in coming days,” Bagadia says.

Mishra opines that the recent consolidation in the index indicates caution among participants and the Nifty needs a decisive break above 15,900 levels to extend the rebound towards the 16,200 zone, else the sideways to negative bias will continue.

He expects the auto and FMCG stocks to continue to do well and advises investors to maintain their focus on identifying stock-specific opportunities but keep a check on leveraged trades.