Structure of the market remains constructive

Indian equity markets continued its rally for the second week in a row. Nifty/Sensex both rose +1.6% each to close at 15,163/51,544. The broader market outperformed, with both Nifty Midcap100 / Smallcap100 up +2.2%/+3.8%.

Majority of the sectors ended in green with IT, Realty, and Infra being the biggest gainers, up 2-3%. Metals, Private Banks, Financials, Auto and Energy too gained 1-2%. PSU Banks, FMCG, Media and Pharma on the other hand were losers, down 1.3% to 2.3%. FIIs continued to be net buyers for the week, having bought equities to the tune of Rs 5,900 crore, while DIIs were net sellers again to the tune of Rs 1,100 crore.

Global cues were mixed as prospects of higher US fiscal stimulus and larger vaccine rollouts globally along with dovish Federal Reserve outlook kept the moods positive. However, less-than-expected fall in the US weekly jobless claims and bleak UK economic data led to little disappointment.

On the domestic side, Nifty was in a consolidation mode for most part of the week and traded in a narrow range. The growth-focused budget unveiled last week had powered the stock market to multiple all time highs – resulting in 11% rally so far this month.

Besides, the Covid-19 vaccination drive and strong corporate earnings also aided the upbeat sentiment. FIIs have also turned buyers in the Indian equity market since February 1 as positive sentiment post-Union Budget 2021 sparked a rally in fund inflows. However, investors remained on the side-lines this week ahead of key macroeconomic data releases amid lack of fresh buying triggers.

Technically, Nifty formed a small bullish candle on weekly scale which suggests buying is witnessed at lower zones. Index has got stuck in between 15000-15250 zones from past five trading sessions. Now, Nifty has to hold above 15050 to continue its bullish momentum towards 15250-15500 while on the downside, major support can be seen around 15000-14850.

Going ahead, with earnings season largely over, global cues will dictate the short term market trend. Market would react to the key macro data - IIP, CPI and WPI data on Monday. Next week, ECB monetary policy will be eyed along with India’s trade balance data. From the long term perspective, the structure of the market remains constructive and one can apply buy on dips strategy.

(The writer is the Head of Retail Research, MOFSL)