Sensex and Nifty started the sixth month of the calendar year breaking records. Both benchmark indices created new record highs on the very first trading session in June—Sensex hitting 40,312.07 while Nifty climbing to 12,103.05 intraday on June 3.
Historically, bulls have controlled the D-Street in the last six out of eleven years, data from AceEquity showed.
Of those six instances, Sensex jumped 9 percent in June 2011, 6 percent in June 2009 and nearly 3 percent in June 2013—three of the biggest gains in June.
On the other hand, bears have dominated the market on five instances in June. Four of those instances are—2008 (Sensex down 2 percent), 2012 (Sensex down 1.09 percent) and 2016 and 2017 (Sensex down 0.7 percent each).
Benchmark indices have rallied about 10 percent so far in 2019. They have registered most of the gains in May post Lok Sabha election results as a stable government at the Center raised hopes of continuity of reforms.
Apart from political stability, fall in crude oil prices, a possible rate cut from the Reserve Bank of India (RBI) and expectation of near-normal monsoon fuelled the rally.
“Firstly, the investors would keep a close watch on the upcoming RBI monetary policy scheduled on June 6. After a thumping victory by the NDA government, the hopes amongst participants have definitely increased for a rate cut in the upcoming policy meeting,” Jayant Manglik, President, Retail Distribution, Religare Broking Ltd told Moneycontrol.
“Further, the progress of monsoon would also be crucial for the markets as any major deficit would hurt the already muted consumption demand in the Indian economy. Additionally, the focus would shift back to global cues, which has been volatile due to US-China trade war and political uncertainty in the UK,” he said.
Although history suggests bulls have an upper hand but the verdict from experts remains fairly mixed. Given the market is trading near record highs, there is a possibility of some profit booking at higher levels.
“June might not turn out to be as hot and fiery as the mood is now and if looked at the current scenario in depth, fresh highs are not supported by enough fire. The volumes are average, FIIs and DIIs have been net neutral amongst themselves and on top of that there are no significant fresh inflows from the domestic investors; SIP inflows are nonetheless stable,” Umesh Mehta, Head of Research at SAMCO Securities, told Moneycontrol.
“These are no conditions for a genuine breakout and therefore this could turn out to be a mirage. Traders might end up buying at the intermittent top and therefore it is time to remain cautious,” he said.
Nifty has already rallied above 12,100 in June but any meaningful upside from current levels remains fairly capped.
“Rollovers towards June series do suggest that we may be entering a short term trending period. It is a matter of time that we may see some trend developing. 11,800-12,200 is seen as a range for now on the basis of derivatives data,” Mustafa Nadeem, CEO at Epic Research, told Moneycontrol.
“The Nifty, in June, could oscillate in the range of 11,800-12,200 on the upside. Above 12,200, we may see further trend continuation but we should be a bit conservative here,” he said.
Institutional activity:
Foreign institutional investors (FIIs) have been net buyers in June in seven out of the last 10 years, according to data from AceEquity.
In the rest of the instances, they pulled out more than Rs 9,000 crore in 2013, Rs 5,000 crore in 2015 and around Rs 2,000 crore just last year.
DIIs were also mostly net buyers in June in seven out of the last 10 years. They poured in more than Rs 10,000 crore in 2015, Rs 9199 crore in 2017 and Rs 6000 crore just last year.
