Analysts are expecting the rally to have more legs as India has promised to up the ante in 2021 and spend even more. FIIs are also showing no signs of fatigue. Besides these things, focus will now turn to Q3 earnings, especially from top IT companies.
“Markets will first react to TCS numbers in early trades on Monday. Besides earnings, global cues and updates on vaccine drive will also remain in focus. At present, the rotational buying across the sectors is helping the index to inch higher and we suggest aligning positions according to the trend. However, traders should avoid going overboard and keep a check on leveraged positions,” said Ajit Mishra, VP – Research, Religare Broking.
Here are key factors that may guide the market this week:
Q3 earnings
The market will react to the earnings report of TCS and Avenue Supermarts. Besides, Infosys, Wipro, Hathaway Bhawani, Amtek Auto, DEN, HCL Technologies, HDFC Bank, Karnataka Bank, Tata Elxsi, 5paisa Capital, GNA Axles, Filatex India, HFCL, Shoppers Stop, L&T Finance Holdings and PVR are scheduled to announce their quarterly numbers.
US politics
With all uncertainties over accession in the US cleared, the path for Joseph Biden to become President is far more certain now. Meanwhile, participants will keep an eye on likely impeachment proceedings against Donald Trump on Monday, which will add to the drama, but may not have much real effect as he will cease to be the President on January 20 anyway.
Coronavirus: No respite
Despite vaccine deployment in the Western world, there is no respite in speed of virus infections. The US is reporting a record number of daily infections and deaths. The same is true for parts of Europe. In India, the market will keep an eye on when and how India deploys vaccines. Meanwhile, there has been a suspicious death of a Bharat Biotech vaccine trial participant.
Nifty Financial Services: F&O entry
National Stock Exchange (NSE) will launch derivatives on the Nifty Financial Services Index on Monday. This index will include 20 stocks from financial institutions, banks and insurance. As an incentive, NSE has decided to waive transaction charges on the contracts for some time.
FII fund flow
Foreign investment in the equity segment continued during the last week, but pace has tapered slightly. During the week, they invested a net Rs 4,203 crore taking the current month’s tally to Rs 4,819 crore. Analysts believe the trend may continue in the coming week as well.
Inflation: Data due
High inflation has been a sore point in RBI’s plan to ease its monetary policy further and hence will be eyed by investors. Forecasts say retail inflation and wholesale inflation for December, to be announced on Tuesday and Wednesday respectively, will come down month-on-month, which is good news ahead of the next policy meet.
Factory output
Indian authorities will also release Industrial Production and Manufacturing Production data for November which will be tracked by market participants. The data will shed light on the true picture of economic recovery.
Technical outlook
Nifty50 index closed the week on a positive note as the market remained unaffected in the short term and continues to surge higher. This week almost all sectoral indices closed in green except FMCG while metals, IT and media continued to lead.
“Nifty now seems to be heading towards 14,500 as it is lacking any significant negative events. On the downside 13,950 has been established as an immediate support and a break of the same may trigger a profit-booking move in the short term. The market continues to remain overbought in the short-term and we maintain a cautiously bullish outlook unless the market breaks below 13,950,” said Nirali Shah, Senior Research Analyst, Samco Securities.
