Ample signs everywhere, bulls want to dominate this Diwali

The domestic equity market witnessed buying by FPIs and DIIs during the week gone by on improved sentiments and improving prospects for the economy. FPIs have initiated buying equities aggressively and covered their short positions, which has relieved Mr Market and cleared a major overhang.

Therefore, new highs are expected sooner than earlier estimates. IRCTC witnessed a bumper listing gain of 101 per cent over its issue price, which signalled that people are ready to take risk and increase equity exposure in the market. This, in turn, can help the government to quickly divest some of the companies that are up for strategic disinvestment. Money in the hands of the government will eventually help bridge fiscal deficit and boost infrastructure spend necessary to fuel the growth in economy.

When IMF and World Bank beat the drum of slowdown in any economy, it means the phase is already over and better times are ahead. Recently, both IMF and the World Bank trimmed India’s GDP growth prospects by a whopping 0.9 per cent and 1.5 per cent, respectively. Historically, such downgrading has been a good indicator of market bottoms.

After the government’s holistic growth push through corporate tax cuts and recapitalisation of PSU banks, FPIs paring short positions and continued domestic inflows now point to one thing, that the worst may be behind us. Unless something dramatically goes wrong on the global front, Nifty50 looks all set to touch new highs before Christmas.

Event of the week

The September quarter earnings season continued with a bang, as Mr Market felt the glitters and jitters in the earnings numbers from HUL and ZEE Entertainment and others during the week.

HUL reported a strong set of numbers with PAT growing nearly 21% year on year, on cost control and margin improvement. ZEE Entertainment reported a disappointing marginal increase in PAT at 6.87 per cent, mainly due to a one-time loss of Rs 170 crore, which raised concerns over corporate governance.

Technical Outlook

Nifty50 is likely to face resistance at higher levels. The 11,950 level is likely to act as a strong resistance. However, some profit booking is expected at 11,700 level in the near term. There is marked weakness in Bank Nifty compared with Nifty50, which makes the ongoing rally a fractured one, susceptible to sharp falls in the short term. Traders should wait for a correction before going long.

Expectation for the week

Mr Market’s current rally is in the catch-up phase, and is likely to extend to individual sectors, which have largely been underperformers. Smallcaps and midcaps are likely to witness buying interest. The quarterly numbers of India’s two most respected behemoths, namely Reliance Industries and HDFC Bank, will set the ball rolling for the end of Samvat 2075.

International metal prices have bottomed out after a few quarters of steady declines. Precious metals are also showing signs of consolidation and can move higher in the near future. Hence, investors may deploy fresh funds at current levels, keeping in mind their appropriate diversification and individual risk-taking abilities.

Nifty50 ended the week 3.2% higher at 11,661.