Bulls may feel tizzy at higher levels

Indian benchmark indices rose for the third consecutive week and gained 0.46% to close at 10943. But the broader market underperformed as the mid and small cap indices lost 2.31% and 3.38% respectively.Sector-wise, except Media, Information Technology (IT), Private Banks and Energy, all the other ones ended negative led by Infra, Metal and Realty.

The foreign institutional investors (FII) bought equities worth Rs 2,570 crore and the domestic institutional investors (DII) were also buyers marginally.In the last week highlights, the US markets cheered with the Federal Reserve commentary and later reacted to the US President Donald Trump's statement on trade tensions with China. At home, the Reserve Bank of India (RBI) reduced rates by 25 basis points (bps) and changed its stance to neutral from calibrated tightening as per my expectation.

January sales of auto companies were in line with expectation except for Mahindra and Mahindra (M&M). Zee Entertainment, Bharti Infratel, Bajaj Auto gained between 9% and 12%. Tata Motors lost 17% on its result announcement in which JLR impaired assets in use by GBP3.1b (~Rs 28,000 crore). The company also gave negative retail guidance for FY19 and lowered Ebit margin guidance to 3-6% for FY20.

Anil Ambani group companies lost around 30-50% due to pledge shares selling by two lenders.In this week global events, Japan December quarter GDP and China December Trade balance are expected on Wednesday. The euro region flash GDP will be released on Thursday. India's December month Industrial Production and CPI will be out on Tuesday while the WPI date is expected on Thursday. January month Trade Balance data will be released on Friday.

In the ongoing earnings season, Amara Raja Batteries, Eicher Motors, Motherson Sumi, Sun Pharma, Hindalco, Coal India, Bharat Forge, Voltas, Ashok Leyland, Page Industries, Mcdowell Holdings, Glenmark Pharma will be announcing their Q3'19 results.Last week, the broader Nifty managed to scale higher close on all the days till Thursday. The 50-share gauge made a high of 11118 but eroded all the gains on Friday (single day) post-Tata Motors result in aa disappointment. Also, reaction to reignited trade war tension with China and fear of a slowdown in global economies affected the index. Nifty traded in the range of 11118-10814. On the weekly scale, it formed a High Wave candle with the long upper shadow which indicates selling pressure at higher levels.

For the week, Energy, IT and Metals stocks could be in focus. Nifty supports are at 10850-10780-10740 while resistance at 11080-11120-11180. The probable trading range for Nifty could be between 10740 and 11120.

SELLING PRESSURE

• Nifty formed a High Wave candle with the long upper shadow which indicates selling pressure at higher levels
   
• For the week, Energy, Information Technology and Metal stocks could be in focus

The writer is VP-retail research, Motilal Oswal Financial Securities