Markets expected to remain positive in near term

Indian equity markets rallied for the second consecutive week to hit a 7-month high. Nifty50 and Sensex surged +4.4%/+4.7% to close at 11,914/40,509 respectively.

IT (+8.6%), Banks (+7.2%) and Financials (6.4%) led the rally, further supported by Auto (+2.5%) and Pharma (+1.9%). Infact, Nifty IT rose to 16-year high with TCS becoming the world’s most valuable IT company and second Indian company to cross Rs10 lakh crore market cap.

On the other hand, Media (-2.3%), Energy (-1.4%) and FMCG (-0.3%) were the losers. The broader market underperformed with Nifty Midcap100 down -0.2% while Nifty Smallcap100 was up only +0.3%. FIIs turned net buyers of Rs 3,372 crore, while DIIs were net sellers of Rs 2,389 crore.

Global cues were positive as renewed hopes for fresh US stimulus package kept the investors’ sentiments high. Further discharge of US President Donald Trump from the hospital alleviated the concerns over political uncertainty.

On the domestic side, flattening out of Covid-19 active cases over the last two weeks, gradual re-opening of lockdown and improvement in macro-economic data along with expectation of more economic stimulus from the Indian government, kept the sentiments high.

Positive commentaries for September quarter from various corporates cheered the market. The Q2FY21 earnings season has started with TCS reporting a sharp beat on its numbers along with strong management outlook.

RBI in its monetary policy announced a series of measures including on-tap long-term repo operations and open market bond purchases, among others, to ensure liquidity in the banking system. It kept the key policy rates on hold citing inflationary pressures, but vouched to stay ‘accommodative’ as long as necessary.

Going ahead, market is expected to remain positive but with very sector/stock specific actions. Technically, Nifty formed a Bullish candle on daily and weekly scale and gave the highest daily close since 20th Feb 2020.

A hold above 11800 can move Nifty towards 12000-12200 while support has moved higher at 11750. Investors would now track earnings season which is expected to show strong sequential recovery and watch out for management commentaries on demand for upcoming festive season. Developments around stimulus package both from the US and the Indian government would keep the sentiments positive. Next week India’s inflation data and industrial output would be watched out along with US Presidential debate, IMF meeting and EU council meeting.

(The writer is Head – Retail Research, Motilal Oswal Financial Services Ltd.)