Nifty likely to witness an upward move

Indian equity markets recorded their biggest weekly gains in 5 months. Nifty/Sensex rallied +5.3%/+5.8% respectively, to close at 12,264/41,893. The broader market performance however was mixed.

While Nifty Midcap100 did participate in the rally and climbed 4.3% during the week, Nifty Smallcap100 was flat and closed with marginal gains of 0.7%. All the sectors ended in green except Realty which ended -0.5% down. Banks were the biggest gainers, up +12.1% - recording biggest weekly gain in 8 months. Financials gained +10.8%, followed by Metals (+6.7%). FMCG, IT, Auto, Pharma and Media, which gained in the range of 2.5%-4%.

FIIs continue to be net buyers to the tune of Rs 13,400 crore, while DIIs were net sellers to the tune of Rs 6,800 crore.

Global cues were positive as Democrat Joe Biden is seen leading over President Donald Trump in the US election, while the Republicans are seen to retain control of the Senate. Investors are taking relief from the fact that there is a high prospect of US policy gridlock which would greatly favour some industries while also restraining government borrowing.

Further, the US Federal Reserve kept its key interest rate unchanged near zero and reaffirmed its readiness to do more to support the economy.

On the domestic side, markets rallied in sync with its global peers, putting behind the uncertainties with regards to the US presidential election. The banking index clearly led the rally this week that started after private-sector lender ICICI Bank reported a higher profit last week.

Strong India’s factory output data which expanded at its fastest pace in over a decade in October, also boosted market sentiments.

Better than expected quarterly results, impressive October auto sales volume and GST Collection crossing Rs 1 lakh crore were some of the other positives, which kept the momentum strong.

Technically Nifty formed a bullish candle on a weekly scale and is likely to witness an upward move towards it’s life time high of 12430-12500 while support exists at 12000-11900. Volatility has significantly cooled down which gives stability to the bulls in the market to ride the momentum.

The overall structure of the market remains positive. With the economic activity recovering fast, more earnings upgrade cannot be ruled out. Further strong global markets can keep the liquidity abundant in the system, thus providing support to the overall market.

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