Market may continue with its positive trend

Indian equity markets saw a smart comeback this week post its recent correction. Nifty50 and Sensex rallied +3.3%/+3.5% to close at 11,417/38,697 respectively.

The broader market also gained with Nifty Midcap100/Nifty Smallcap100 up +3.8%/+3.6% respectively. All the sectors ended in green with Banks and Financials being the biggest gainers, both up 6% each. Even Media rallied 7.2%, while Metals, Auto and Realty gained 3-4%. FIIs continued to be net sellers, selling equities worth Rs 2,644 crore, while DIIs continued to be net buyers, buying equities to the tune of Rs 3,858 crore.

The global cues turned positive led by better-than-expected macro data points and rising hopes for an additional stimulus package. Further positive progress towards a possible coronavirus treatment by Regeneron Pharma and promising results from Moderna’s coronavirus vaccine trials also cheered the markets.

But concerns over rising Covid cases in the US and resurgent of cases in Europe continue to worry about global markets. Even the presidential debate between US President Donald Trump and Democratic candidate Joe Biden has begun which would keep the US markets volatile.

On the domestic front, positive global cues, another phase of ‘unlock’ and a host of positive macro data lifted the sentiments. Decent Auto sales numbers for the month of September 20 also provided support to the market.

Banking stocks gained momentum as business activities for many banks have reached almost the pre-covid levels despite the overhang of the Supreme Court hearing on the loan moratorium case. Media stocks on the other hand, rallied after the government allowed cinema halls to operate with 50% seating capacity under ‘Unlock 5’ rules released by the Home Ministry.

Technically Nifty has formed a Bullish candle on daily and weekly scale and is holding well above its 50 DMA. The overall structure of the index is positive with buy on decline strategy as supports are gradually shifting higher. Now it has to hold above 11300 to witness a further up move towards 11500-11600 while support exists at 11200.

Going ahead, the market may continue with its positive trend in the near term amid hopes of stimulus announcement – both from the US government and Indian government. Next week, market would get direction from the decision on the loan moratorium case on Monday and RBI’s monetary Policy on Tuesday. The second quarter results would also kick start next week with TCS reporting its numbers on Wednesday.

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