By Rohit Vaid
The country’s key stock markets are expected to witness another round of upswing as PSUs along with FMCG continue to attract buyers.
Accordingly, market observers contend that rising foreign fund inflows along with better-than-expected macro-economic figures will give a further push to the domestic market, which has already reached record levels.
Last week, foreign institutional investors pumped in over Rs 15,000 crore into the equity markets.
The inflow not just lifted equities but also swelled the Reserve Bank’s forex reserves.
India’s key domestic indices – S&P BSE Sensex and NSE Nifty50 — closed last week on record high levels.
However, analysts opined that high valuations and chances of profit booking might cap overall gains.
“Nifty continues to recover from intra-day lows suggesting bottom fishing by traders or investors. However, it also keeps facing resistance at higher levels,” said Deepak Jasani, Head of Retail Research at HDFC Securities.
“Nifty could continue its uptrend for the coming week with some intermittent sell-offs. PSU, FMCG and IT indices could do well.”
According to Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services: “The overall trend of the market remains positive as it is showing resilience on the back of abundant liquidity, positive developments on the vaccine front and signs of economic recovery.”
“The market may however consolidate at these levels for some time given the stalemate in US stimulus and concerns over probable no-deal Brexit talk.”
In terms of global outlook, they said crucial US Fed, BoE and BoJ meets to review interest rates will impact the international as well as domestic markets.
Analysts further pointed out an acceleration in global economic activity as – copper – prices surged recently. The industrial metal which has been long seen as a bellwether for the international economy.
Besides, oil prices are recovering from the worst effects of the lockdowns; and extreme weather and strong Chinese demand are driving up crop prices around the world.
“As winter sets in, the only factor that is likely to spread the shadow of gloom would be the lack of progress in Brexit negotiations, which has been eluding a clear resolution so far,” said Joseph Thomas, Head of Research – Emkay Wealth Management.
“The markets may be heading into a time of lower activity levels, thin markets, and holidays very soon, with Christmas and new yjust around the corner.”
On the domestic front, next week, the National Statistics Office is slated to release the macro-economic data points of Consumer Price Index on December 14.
It will also release the Wholesale Price Index on Monday.
“In the coming week, domestic markets will be waiting for major data points like inflation and import-export updates. Although, an improvement in November inflation levels compared to previous month is expected, it will still be at elevated levels,” Geojit Financial Services Research Head Vinod Nair said.
“The trend in global markets will be guided by developments in Brexit deal talks over the weekend and updates on the expected US stimulus package. Redemption pressure from domestic institutions and possible hike in global volatility are the watch list today.”
In addition, S Ranganathan, Head of Research at LKP Securities: “While the week gone by clearly belonged to the Nifty PSU Bank index and the FMCG index, the coming week could very well see outperformance of PSU stocks as the street braces itself for divestment news as well as hopes of higher dividend from cash rich PSEs.”
“As volatility trading itself has picked up momentum with the advent of several tools used to trade volatility, we expect the coming week to be a volatile week.”
(Rohit Vaid can be contacted [email protected])