Indices may Scale Record Highs This Week

Happy days are back again for the Indian equity markets. After consolidating for more than three months (13 weeks), following the presentation of the Union Budget on February 1, the equity market is set to reach a take-off position in the coming week following a sharp jump seen on Friday last.

Indian benchmarks gained more than 3.30 per cent on a weekly basis. The Nifty-50 gained 498 points and was up by 3.39 per cent to 15,175, while the BSE S&P Sensex gained a whopping 1,808 points or 3.71 per cent to close the week at 50,540. This is the best weekly performance of the benchmark indices since February 2021. The good thing about last week’s trading is that the broader market continued to outperform the benchmark indices.

Easing Covid concerns, fluctuating global cues, and robust implications on corporate results are the factors that drove the markets last week. This trend is expected to continue further as we enter the expiry week for May contracts in the derivatives segment. The Nifty and the Sensex are just 256 points and 1,976 points away from its respective all-time high of 15,432 and 52,517 points, the level achieved on February 16. What is more exiting is all the 11 broader market indices are at just a kissing distance from their 52-week high level.

Shrikant Chouhan, Executive VP, Equity Technical Research, Kotak Securities is of the opinion that the market behaviour of last week is an indication of optimism on the reopening of the economy.

Nifty and Bank-Nifty closed at the highest level of the last four weeks. Though FPIs sold stocks worth Rs 2,300 crore during the week. The Nifty Midcap index closed in the blue sky after consolidating for nearly 10 weeks.

Based on the weekly and daily establishment of the market where it has crossed the short-term averages and a swing high at 15,150 with strong market width, Chouhan said, “We can conclude that the market is on the way to cross 15,450 in the next few days or a few weeks. Above the level of 15,450, it will arrest at 15,600/15,650. The Bank-Nifty is heading for the 36,500 levels. The strategy should be to buy on dips. The support for the market exists at 15,050 and at 14,900.”

The focus for the coming week should be on medium-sized banks, real estate and infrastructure stocks. However, things should change as the dollar index starts trading comfortably below the 90 level, he added.

While FPIs pulled back Rs 2,900 crore last week till Thursday, India held on to its top position as the most preferred emerging investment destination since April 2019, barring a few months of net selling in between.

In the past 12 months India has garnered the highest FPI equity inflows of over Rs. 36,618 crore (as of April 30). Brazil ranks second with around Rs. 10,811 crore, as per CLSA data, while other emerging markets (EMs) such as Indonesia, Taiwan, Thailand and South Korea have seen outflows on net basis.

This data indicates that a few months of FPI outflows could cause short-term corrections in the domestic markets but at the end of the day Indian markets continue to remain stable at the current moment.

The Union government has sold its Axis Bank stake held through SUUTI and has garnered Rs 4,000 crore during the week. This development has raised hopes for centre’s ambitious disinvestment/privatisation programme by way of which it plans to raise Rs. 1.75 trillion for FY22. This may be possible in second half of FY22, said Nirali Shah, Head of Equity Research, Samco Securities.

Deepak Jasani, Head of Retail Research, HDFC Securities is of the view that the hopes of a fresh stimulus and the transfer of surplus of Rs.99,122 crore as dividend by the Reserve Bank of India (RBI) to the centre, boosted sentiments on the street. Also encouraging PMI data from across the Eurozone and other parts of the globe and falling Covid cases locally helped lift trader spirits.

Explaining the market technical position, Vishal Wagh, Research Head, Bonanza Portfolio said, “Nifty has completed a small rounding pattern on weekly basis. In the coming, expiry week the market may witness further strength and move towards an all-time high”.

The major contribution will be seen from Financial and Autos. Whereas, IT likely to underperform. Metal may face supply. Funds likely to shift from metal to banking, he said.

Ajit Mishra of Religare Broking feels our markets can outperform the global peers in near future, tracking the favourable developments on the local front. On the benchmark front, Nifty might take a breather around 15,300 followed by the hurdle at the record high.

Almost all the sectoral indices are participating in the move but the focus would remain on banking and financial to maintain the prevailing momentum, he said.

On the earnings front, Grasim, Berger Paints, BPCL, Eicher Motors and Sun pharma are some of the key names who will be announcing their numbers during the week along with several others.