Market may continue with its positive bias

Market may continue with its positive bias

Mumbai: BSE building as the Sensex plunges by more than 1000 points, in Mumbai, Thursday, Sept. 24, 2020. (PTI Photo/Mitesh Bhuvad)(PTI24-09-2020_000085B)

Indian equity markets clogged seventh weekly gains with both Nifty/Sensex up +1.8%/+1.9% to close at new record highs of 13,761/46,961. The broader market too gained with both Nifty Midcap100 / Smallcap100 up +1.8%/+2.0%.

Majority of the sectors ended in green with Realty and Pharma being the biggest gainers, up 3-4%, followed by IT, Financials, Metal, and Media, up 2-3%. PSU Banks were the biggest losers, down -3.4%, followed by FMCG (-0.8%) and Auto (-0.2%). FIIs continued their buying spree for the eleventh straight week and bought equities to the tune of Rs 11,800 crore, while DIIs were net sellers to the tune of Rs 11,000 crore.

Global cues were positive on optimism over the US stimulus package and the Federal Reserve’s promise to keep pouring cash into markets. In fact, Asian stocks scaled record heights while the dollar plumbed two-year lows and oil prices hit their strongest since March.

European markets on the other hand, remained at 10-month highs as hopes of Brexit deal and potential Covid-19 vaccine rollouts in the country strengthened the case for a global economic recovery. However there are some concerns arising as United States is set to add dozens of Chinese companies to a trade blacklist. There are also worries about increasing Covid-19 deaths and lockdowns.

On the domestic side, Nifty posted its longest run of weekly gains since April 2019. FTSE rebalancing coupled with strong demand for IT stocks post Accenture strong results and outlook lifted the momentum.

Sentiments remained buoyant on the back of abundant liquidity, earlier-than-expected rollout of Covid-19 vaccines, and decreasing domestic Covid-19 cases. Sugar stocks were in focus during the week as the Cabinet approved Rs 3,500 crore subsidy for sugar farmers and Rs 6,000 per tonne subsidy for sugar exports.

Meanwhile, better than expected IIP and inflation data and lower contraction in FY21 GDP expected by ratings agency S&P at 7.7% from the 9% contraction expected earlier, cheered the markets.

Going ahead, the market may continue with its positive biasedness on the back of abundant liquidity, effective vaccine rollout and increasing prospects of Brexit deal and US Stimulus. However, intermittent profit booking cannot be ruled out as the Christmas vacation starts from next week and the FII liquidity would slow down.

The market could also be volatile given the monthly F&O expiry next week. Technically too, Nifty has to continue to hold above 13600 to witness an up move towards 13850-14000 while the support exists at 13500. India VIX was marginally down by 2.8% to 18.6. Overall lower levels of volatility suggests that Bulls are holding the tight grip and any small decline could be bought in the market. Investors would also track Japan/China’s interest rate decision and US/UK’s GDP data next week.

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