Cues positive for Indian markets; Bull rally to continue

Indian equity markets gained for the fourth week in a row with Nifty hitting yet another all-time high of 15,835 while Sensex surpassed 15th February 2021 all-time high for the first time to touch a new high of 52,641. Nifty and Sensex also posted record weekly closing highs of 15,799 and 52,475 respectively – gaining 0.8 per cent and 0.7 per cent WoW.

The broader market continues to outperform and touched new all-time highs with both Nifty Midcap100/ Nifty Smallcap100 up 2.9 per cent WoW each. Majority of the sectors ended in green with IT and media being the biggest gainers – up 4.5 per cent and 3.5 per cent respectively.

Pharma and energy gained more than 2 per cent each, while FMCG, realty and metals gained more than 1 per cent each. Banks and financials on the other hand fell 0.6 per cent and 0.7 per cent respectively, capping market gains.

FIIs remained net buyers for the third week in a row, having bought equities to the tune of Rs 1,700 crore while DII were sellers to the tune of Rs 800 crore.

India VIX fell by 11.5 per cent during the week to 14.1 levels – which is near to its lowest levels of the last 17 months since February 2020. Falling VIX could continue to keep a buy on decline strategy in the market.

Global cues were mixed ahead of crucial US CPI data which was supposed to be released on Friday, as investors wanted to look out for any sign that could start tapering of massive stimulus by the Federal Reserve. However, post the release of the data which was higher than expectation, market sentiments did not turn negative and markets continued with its positive momentum.

On the domestic side, sentiments were buoyant as India continued to report less than 1 lakh new cases of Covid-19 infection for the fourth day in a row. Vaccination is now expected to gather momentum as Government has reversed its vaccine policy to announce free shots for all and would be placing order for vaccines at central level.

Further the government's decision to increase MSPs for several Kharif crops and good monsoon expected for the third year in a row also cheered the market.

The further direction of the domestic markets would depend on the monsoon, opening up of the economy in a phased manner and the pace of vaccination going forward.

As states ease restrictions gradually in June, we expect the demand environment to get better which can have a positive impact on the markets.

Technically too, Nifty remains in a positive set up and can see a move towards highs of 16,000 zones.

(The writer is Head – Retail Research, MOFSL)