Overall structure of market to remain positive

Indian equity markets extended its positive momentum for the fifth week in a row with both Nifty/Sensex up +2.2%/+2.1% to close at new record highs of 13,259/45,080.

The broader market too gained with both Nifty Midcap100 / Smallcap100 up +2.4%/+1.9%. All the sectors ended in green with PSU Banks being the biggest gainer for the third consecutive week, up more than +9%, followed by Metals and Realty – both up more than 8%.

Pharma, Media, Auto, Infra and Energy also gained in the range of 4-5%. FIIs continued their buying spree into the first week of December too and bought equities to the tune of Rs 10,200 crore, while DIIs were net sellers to the tune of Rs 6,000 crore.

Global cues were positive on the back of growing prospect of large US economic stimulus package and hopes that vaccine rollouts will boost the global economy. Pfizer and BioNTech sought emergency approval of their vaccine from the European regulator while their competitor Moderna too applied for emergency approval. The government of UK approved the Pfizer coronavirus vaccine for use ‘from next week’ becoming the first country to begin vaccinating its population as it tries to curb the deadly Covid-19 outbreak. Sentiments were also boosted as US lawmakers proposed a $908 bln Covid relief bill.

On the domestic side, Nifty touched a fresh record high of 13,280, before settling a little lower. With fresh covid cases reducing, and potential vaccine in sight, hopes of quicker economic recovery continues to add strength to the momentum. Bank Nifty recorded gains for the 5th straight week - surpassing the 30,000 level, after RBI upgraded its GDP target to -7.5% (-9.5% earlier) for the current fiscal year and kept interest rates steady given high inflation.

The overall accommodative stance of RBI and the positive commentary that the economy was recuperating fast and would return to positive growth in the current quarter itself boosted sentiments.

Going ahead, the overall structure of the market will continue to remain positive given consistent FII inflows, optimistic RBI policy outcome and developments on the vaccine front. Sustenance of the demand recovery after the festive season would be key to watch out for. From the portfolio perspective, we are positive on IT, BFSI, Healthcare, Telecom, Auto and consumer. Next week, investors would track progress on US stimulus which is again gaining momentum. ECB interest rate decision next week would also be kept on radar.

Technically too, Nifty formed a Bullish candle on weekly scale and continues forming higher highs - higher lows from the last five trading sessions. Now it has to hold above 13100 to witness an up move towards 13400 levels while on the downside, major support exists at 13000. India VIX further cooled off by 5% to 18 levels. Lower levels of volatility also suggest that bulls are holding the grip and any decline could be bought in the market.

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