Markets set for fresh upmove on overseas tailwind

The markets witnessed a bullish week as the headline indices closed above their 200 day simple moving averages and volumes rose marginally on the upthrust. That the rally comes near the fiscal end and coincides with the nearing of the March derivatives series makes it an interesting coincidence.

The weekly combined exchange market breadth was positive as the figures were 11,791 : 9,693. The capitalisation of the same on a commensurate basis was also positive as the figures were Rs35,359 crore : Rs32,488 crore. In terms of sectoral strength, the bull charge was led by the banking sector, followed by the technology and mid-cap sectors. That the retail players did not manage to participate in the upthrust is borne by the sluggishness in the mid-cap segment, which is a hot spot of retail activity.

The National Stock Exchange gained Rs2,40,095 crore in market capitalisation on a week-on-week basis.

The overseas investors were net buyers to the extent of Rs984.2 crore and that saw the rupee closing at 44.66 levels vis-a-vis the US dollar (previous week 45 levels). The US markets witnessed an outperformance by the new economy benchmark, Nasdaq Composite, over the Dow Jones Industrial Average as the markets recouped part of their losses of the previous weeks. The UK FTSE 100 gained similar amount of ground. In the Asian region, the rally was led by the Singapore markets, followed by the Hong Kong, Japan and China markets. The overseas cues are positive and the domestic markets are enjoying a tailwind that is likely to aid an upmove this week.

Technically, the domestic markets are poised for a fresh upthrust as the Nifty has closed at its highest weekly close after week ended January 21, 2011. The weekly range advocated for the Nifty between the 5650 / 5250 has held as the Nifty has closed near its resistance threshold. This week is likely to witness a range of 5850 on the upside as long as the bulls manage to keep the Nifty above the 5550 bullish pivot. The outlook will turn weak as long as the Nifty trade below the 5475 levels, in which the worst-case scenario indicates 5250/5150 levels, though the probability of the same appears remote.

Traders are advised to maintain a buy side bias at least in the first half of the week and trade the markets on curtailed exposure levels as volatility is likely to be on the ascent.