Consolidation On Cards – Nifty Could Trade In Range Of 11,800-12,050 For The Next Week!
The celebration continues on D-Street with the Sensex recording fresh all-time highs. Meanwhile, the Nifty touched the 12,000 mark and achieved our target mentioned in our last editorial. But it is still away about a per cent from its all-time high levels. Nevertheless, the josh on the street continues to be high as out of the last five trading sessions, four trading sessions have been positive ones. In the last five trading sessions, FPIs have bought shares worth about Rs 1,879.50 crore after infusing nearly Rs 8,596 crore in the month of October. In contrast, DIIs have sold shares worth nearly Rs 3,348 crore. However, we believe one should not read too much into it. We have seen in the past that DII flows are strong when the markets are in a correction mode and they tend to book profits on substantial market rises, which we have seen of late.
During the week, there were not many events or trigger to drive the markets. However, the sole and important trigger were the quarterly earnings. More than half of the Nifty 50 firms have reported their quarterly earnings so far this season and a majority of these have been better than expected or in line of expectations of the street. This is the best operational performance in more than two years, mainly aided by a low base amid a slowing economy.
The biggest trigger this week was the Cabinet infusing another dose of booster in the form of setting up of a Rs 25,000 crore alternative investment fund (AIF), aimed to help stalled housing projects, thereby enabling them to complete their unfinished projects and consequently ensure delivery of homes to a large number of homebuyers. The fund will provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing segments. While, this was a need of the hour for the real estate sector which is finding it difficult to raise funds after the default by the IL&FS group last year leading to a liquidity crisis in the economy, but the actual implementation and execution is quite critical.
Among global markets, the Dow and the tech-heavy Nasdaq posted a streak of record highs on optimism about the expected outcome of phase one of the deal between US-China. However, media reports indicated that the meeting between the leaders of the world’s two largest economies may get delayed until next month, and this tempered sentiments.
Speculation on the Nifty attaining the all-time high level, and conversely, the market breadth having turned sour, have created quite some frenzy among investors in the last couple of days. Well, we believe the Nifty flashing an overbought signal on a couple of lead technical indicators and failing to reclaim its all-time high levels clearly reflects that the bulls, despite active efforts, are unable to generate any quick pick-up in the momentum, due to lack of any major trigger. The Nifty seems to be having taken a breather after a strong rally of 8 per cent. To cut the long story short, we expect the Nifty to swing within a range of 11,800-12,050 in the near term. In the coming week, the domestic equities market is likely to be guided by a host of key macroeconomic data, which include IIP, CPI and WPI inflation numbers. At this moment, our instruction to investors holding fundamentally strong growth stocks is to maintain clam and continue holding their positions. For momentum traders, we advise on following a trailing stop loss at 11,800 levels on the Nifty and book partial profits on existing positions on the index. The trend of the Indian market still remains positive, but we expect the next big move to occur only after a period of consolidation.
