Markets likely to react to September quarter GDP data

Indian equity markets extended its positive momentum for the fourth week in a row with both Nifty/Sensex up +0.9%/+0.6% to close at 12,969/44,150.

Nifty touched a new record high of 13,146 during the week before settling at lower levels. The broader market sharply outperformed with both Nifty Midcap100 / Smallcap100 up +4%/+6.3%.

All the sectors ended in green with PSU Banks being the biggest gainer for the second week in a row, up more than +6%, followed by Metals (+5.4%) and Realty (+3.9%). Pharma, Media and Auto also gained ~2.5% each while Private Banks, IT and Energy gained ~1.7% each.

FIIs continue to be persistent buyers since the start of November and have bought equities to the tune of Rs 65,000 crore, which is the best monthly inflow so far. DIIs on the other hand, were net sellers to the tune of Rs 48,000 crore for the month so far.

Global cues were positive led by optimism over Covid-19 vaccines, Joe Biden’s US presidential election win and hopes for further stimulus. Infact, Dow Jones crossed 30,000 mark for the first time, on the back of improved global outlook.

On the domestic side, short-covering ahead of November 2020 F&O expiry and the rebalancing of MSCI portfolios led to strong momentum in the market especially in midcaps and smallcaps.

Infact, market witnessed highest ever F&O volume of Rs 72.6 Lakh crore this expiry vs its previous best of Rs 65.7 lakh crore. Nifty finished the month ~11.5% higher — it’s second best monthly performance this year, after a 14.7% gain in April — led by record FII inflows and progress on Covid-19 vaccines.

Gas transmission companies jumped as oil regulator PNGRB simplified the country’s gas pipeline tariff structure to make the fuel more affordable and to attract investment for building gas infrastructure. Auto shares gained post Maruti raised its production estimates for the current fiscal.

Going ahead, the overall structure of the market remains positive, but intermittent profit booking cannot be ruled out given the sharp rally in the past few weeks.

Technically, Nifty has to hold above 12900 to witness a bounce towards 13150-13250 levels while the support exist at 12800. India VIX has also cooled down to below 20 levels, which suggests that bulls are holding the grip and any decline could be bought in the market.

Globally, investors would watch out for Joe Biden transition and the developments over stimulus announcement from the new US government.

On the domestic side, market would react to the better than expected September quarter GDP data at -7.5%. Auto companies would be in focus as November sales data would start coming from Tuesday (Market remains shut on Monday). Banks and Financial stocks would be in focus as RBI’s monetary Policy is scheduled on Friday.

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