Nifty closes above 18,600 for the first time, next hurdle 18,700

The Nifty hit another high to close above 18,600 for the first time on November 29, extending the uptrend to the sixth consecutive session supported by positive global cues and buying in FMCG, metal and pharma stocks.

After opening flat at 18,552, which was also the day's low, the index traded higher for the rest of the day. It hit a new high of 18,678 and closed 55 points higher than the previous day at 18,618. The index has formed a bullish candle on the daily charts, making higher highs for the fifth straight session.

Momentum indicators the Relative Strength Index (RSI) trading above 60 and Moving Average Convergence and Divergence were trending upward on the daily and weekly charts, with MACD giving a positive crossover on the daily frame.

"The market is consistently holding higher high and higher low formation which is broadly positive. Hence the support has now shifted to 18,550 from 18,450," Shrikant Chouhan, Head of Equity Research ( Retail) at Kotak Securities said.
As long as the index trades above 18,550, the uptrend will continue. The market can move to 18,750-18,800, the expert said.

The broader market, however, saw profit booking, with the Nifty midcap 50, midcap 100 and smallcap 100 indices declining half a percent each. On the options front, the maximum Call open interest was at 19,000 strike followed by 20,000 strike, with Call writing at 18,800 strike then 18,700 strike. The maximum Put open interest was seen at 18,000 strike followed by 17,000 strike, with Put writing at 18,600 strike then 18,500 strike.

The data indicates that in near term, the Nifty may trade in range of 18,400 to 18,800. India VIX was up by 0.36 percent to 13.62 levels, but overall it has been cooling off for the last nine weeks and supporting the bulls.

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5 factors that will keep traders busy

After taking a breather in the previous week, the market resumed its uptrend and ended the week at a record closing high with a 1 percent gain on November 25, following an up-move in global counterparts amid rising hope that the Federal Reserve may slow down the pace of rate hikes in the upcoming policy meetings. The declining oil prices, buying by FIIs, and falling US bond yields, too, lifted the sentiment.

The BSE Sensex rallied more than 600 points to 62,294 and the Nifty50 jumped over 200 points to 18,513, while the broader markets were also in action after recent consolidation, with the Nifty Midcap 100 and Smallcap 100 indices gaining more than 2 percent each.

Auto, banks, technology, infrastructure, and oil and gas stocks supported the market, whereas power and realty stocks were under pressure.

In the coming week, too, the momentum along with consolidation is expected to sustain, with the Nifty likely hitting its intraday record high of 18,604, with focus on monthly auto sales numbers and second quarter GDP data on the domestic front, and global cues, experts said. The Bank Nifty as well as the BSE Sensex reclaimed their previous tops.

"Going ahead, the lack of strong fundamental triggers will limit the upside, keeping the market volatile in the short term. The Fed Chair's speech, scheduled for the next week, and the release of other significant macroeconomic data will influence the market's future trajectory," Vinod Nair, Head of Research at Geojit Financial services, said.

1) Quarterly GDP Numbers
The quarterly economic growth rate scheduled to be released on coming Wednesday is the key factor to watch out for next week. Most experts expect the economy to grow more than 6 percent in the September FY23 ended quarter (Q2CY22), lower compared to a growth rate of 13.5 percent recorded in the previous quarter (on a low base due to Covid-led lockdown in Q1FY22), supported by pent-up demand and economic activity normalization.

2) November Auto Sales
Monthly auto sales numbers scheduled to be released in the latter part of next week will also be watched. Commercial vehicle demand momentum is expected to continue in November, while the passenger vehicle sales are likely to be supported by improving semiconductor supply, experts said, but the sustainability of demand for two-wheeler post-festive season is a key to watch.

3) Oil Prices
The correction in oil prices was one of the reasons for strengthening market sentiment last week as it raises hope for ease in inflation and fiscal deficit concerns along with improving margin pressure for corporates. Also, the RBI may heave a sigh of relief as the rate hike pace may be slowed down, experts said.

4) Global Economic Data Points
Investors will closely watch the second estimates for the third quarter (CY22) US GDP, US unemployment rate for November, and monthly manufacturing PMI data due next week.

5) FII Flow
Healthy buying by foreign investors in November seems to have raised the confidence of the market. Experts largely feel the flow is expected to continue in the coming weeks with the fall in the US dollar index, and bond yields and given the India is the fastest-growing economy in the world.

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Nifty may cross 19,000 by December if global market supports

"The declining trend for US inflation (7.7 percent in October against 8.2 percent in September) looks sustainable now as most commodity prices have cooled off by 10 percent to 20 percent in the last nine months," Amit Jain of Ashika Global Family Office Services says in an interview to Moneycontrol.

After a significant run-up in the market, Amit believes by December 2022, the Nifty will have a new lifetime high, and may also cross 19,000 if the global market supports it. The Indian stock market has already discounted the interest rate risk at the current valuation, says the Co-founder of Ashika Global Family Office Services.

At this level, with over 18 years of experience in the BFSI domain, Jain feels there are some value-buying opportunities in the pharma, IT, and banking sectors. Edited excerpts: With the falling inflation in the US, do you think a major concern is easing and now we don't have to worry, or do we need to watch out for more data?

On Thursday, US inflation numbers at 7.7 percent came in a pleasant surprise for global markets. Both Dow Jones and Nasdaq rallied 3 percent to 6 percent at the index level. Also, the US 10-year G-Sec bond yield fell below 4 percent, which has given a lot of comfort to bulls to take fresh long positions.

This declining trend for US inflation looks sustainable now as most commodity prices have cooled off by 10 percent to 20 percent in the last nine months. Hence, in my view, there is a higher chance that US inflation has already peaked two months back, and now, going forward, each inflation number will have some downtrend.

With the hope of easing concerns of aggressive rate hikes by the US Federal Reserve, do you think the Indian equity markets will rally to surpass 19,000 by December-end?

Yes, there is a very high chance that by December 2022 we will have a new lifetime high for Nifty, which may also cross 19,000 as well if the global market supports it. However, the only assumption for this prediction is neutral geopolitical risk. The Indian stock market has already discounted the interest rate risk at the current valuation.

What are your thoughts on job cuts announced by several service companies in the US? Is it a big worry for the job market?

Any layoffs are always painful for professionals. So, of course, I am not feeling great for those who are laid off, but this may be the beginning of the end for interim problems faced by these US companies, as now they may have much higher productivity per employee, as most of the roles which are laid off were either from support function or from redundant job roles.

These layoffs certainly trigger a wave of concern for IT professionals worldwide.

Do you think the worst of rupee depreciation is behind us now?

Yes, I had been maintaining that stance from the beginning, that rupee will continue to outshine other currencies like GBP, Euro, and Japanese yuan in the short to medium term.

In the last year, the Dollar index has moved from 90 to 115, which reflects the strength of the US dollar rather than the weakness of the rupee. If you observe the rupee's performance against the GBP, Euro, and Yen, then you can say that the rupee has actually appreciated, rather than depreciated in this transitional phase of the global currency reset.

What are your broad expectations from Union Budget 2023, especially ahead of the General Elections in 2024?

Till now all budgets by the ruling government have been extremely pragmatic and focused on the bottom of the pyramid of Indian society.

In my view, this trend will continue even in Union Budget 2023. We may have some further PLI (production-linked incentive) schemes for start-ups and mid-size corporates. Also, we may have some dedicated initiatives for farmers as rural demand continues to lag post-Covid.

What are your thoughts on the corporate earnings season that is ending soon? What do you make of the management commentaries about the future trend?

The results of most corporates have been in line with expectations. Most of the management is bullish on Q3 projections as inflation numbers are consistently coming down every month. Hence, we may see some revival in export-oriented sectors. At this level, we may see some value buying opportunities in pharma, IT, and banking.

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FIIs buy India stocks worth $1 billion in last six sessions

Between October 20 and 28, FIIs bought $923 million in equities, according to data from NSDL. Provisional data from the National Stock Exchange showed that on October 31, foreign investors bought around Rs 4,178.61 crore in Indian equities. Foreign institutional investors (FIIs) have bought $1 billion in Indian equities in the past six sessions and analysts believe the buying spree could continue amid hopes that US Federal Reserve may go slow on rate hikes.

Between October 20 and 28, FIIs bought $923 million in equities, according to data from NSDL. Provisional data from the National Stock Exchange showed that on October 31, foreign investors bought around Rs 4,178.61 crore in Indian equities. Markets in October were volatile. However, in the last few sessions it started trading higher. From October 1 to 13, both the Sensex and Nifty were down nearly 0.5% each, but started gaining from then.

Investors were cautious due to weakness in the broader indices as mid- and small-cap companies continued to underperform blue-chip stocks. Since October 13 till date, both the BSE MidCap and SmallCap are up just 3% and 1.2%, respectively.  Over that same period, both the Sensex and Nifty gained in 11 out of 12 sessions and rose over 6% each. The Sensex touched the key 61,000-point mark while the Nifty hit the 18,000 mark, just 1% away from its all-time high.

The Federal Reserve meeting will start on November 1 and the US central bank will announce its decision the following day. A rate hike of 75 basis points is already discounted by the market, according to analysts.

Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services, said globally markets are looking forward to the Fed commentary after its meeting.  If it indicates moderation in rate hikes going forward, markets would respond positively, Vijayakumar said.

"Expectation build-up that the US Fed may be looking to slow the pace of rate hikes have led to markets globally doing well over the last one to two weeks. In India, some FPIs (foreign portfolio investors) who were wary of India's premium valuation and had reduced their holdings now seem to be returning," said Deepak Jasani, head of retail research, HDFC Securities.

Among sectors, buying was seen in PSUs (banks, oil exploration and materials), auto, realty, healthcare, telecom, capital goods and consumer durables by local and foreign investors, Jasani said.

Investors were also positive after the US reported strong Q3 GDP numbers, which surprised on the upside with a 2.6% growth, a stable dollar and continued fall in US bond yields. The dollar index was trading in the range of 109-112 in October. The 10-year US Treasury bond yield has fallen nearly 22 basis points in the past six sessions. Investors are now eying US inflation and jobs data that will be out due later on Tuesday.

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