Bullish candle lit on charts, Nifty can make a dash for 10800

Nifty continued its rally surpassing new highs for the sixth consecutive week. Post consolidating in tight range in the earlier part of the week, the index saw smart rally in the last two days and closed with a weekly gain of 122 points (1.16%) at an all-time high of 10681.

Mid and small cap indices continued the rally, gaining 0.9% and 1.71%, respectively, Nifty bank also gained 0.57%, underperforming Nifty on a weekly basis.

Realty, IT, media, metals, consumer, private banks, energy and pharma sectors gained while PSU banks, infra and auto sectors were losers last week.

Foreign institutional investors sold equities worth Rs 965 crore while domestic institutional investors bought worth Rs 2,383 crore in the last week.

The US markets ended at record highs as retail sales sparked optimism in the economy and signalled tax rates will bolster profits for the companies. The Indian markets witnessed buoyancy in the last two highly volatile sessions, largely driven by large cap stocks in oil & gas, private banks and consumer sectors. India’s December month CPI inflation rose to a 17-month high of 5.2%, pushed up by rising food and vegetable prices while November month Index of Industrial Production surprised by rising 8.4%, the fastest growth in two years, led by a robust growth in manufacturing, capital goods and infrastructure activities.

TCS and Infosys reported results that were in line with estimates. TCS bagged $2 billion contract, its largest ever from trans America, to provide systems solutions in US third-party insurance administration business. The government raised Rs 1,200 crore via NMDC offer for sale in the last week, garnering a total of Rs 75,000 crore via divestment in this fiscal. Capital First and IDFC Bank are in merger talks to create a larger institution worth about Rs 1.4 lakh crore of assets and nearly 64 lakh customers. The Idea-Vodafone merger was approved by NCLT Ahmedabad and will now await approval from NCLT Mumbai. The initial public offer of Apollo Micro Systems, which primarily caters to defence and aerospace sectors, was subscribed 248 times.

Key events in this week are US month industrial production numbers on Wednesday, China December quarter GDP and January month industrial production numbers will be released on Thursday. India’s WPI inflation and December month trade balance data will be announced today after 5 pm. The GST Council meeting is scheduled on Thursday to discuss ease of GST returns filing and claim refunds. In the ongoing quarterly result season, Federal Bank will announce results today, MCX (Tuesday), Hindustan Unilever Ltd, Mindtree, ZEE (Wednesday), Bharti Airtel, UltraTech, YES Bank (Thursday) while HDFC Bank, HCL Technology, ITC, Kotak Mahindra Bank, PC Jewellers and Wipro will announce it on Friday.

This week the market trend may again remain in the narrow consolidation range with result and stock-specific action, Mid and small cap stocks will remain in the action driven by retail investor focus and domestic fund’s activity.

Technically, Nifty has formed a Bullish candle on the weekly scale and registered the highest daily as well as weekly close. Investors can expect upmove towards 10750-10800 till it sustains above 10600 level, while on the downside the support is strong at the 10550 level.

BULLISH TRIGGERS

• The government raised Rs 1,200 crore through NMDC offer for sale in the last week
   
• Idea-Vodafone merger was approved by NCLT Ahmedabad and now awaits approval from NCLT Mumbai
   
• The IPO of Apollo Micro Systems, which primarily caters to defence and aerospace sectors, was subscribed 248 times

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