Nifty View: Indian markets continued to gain on persistent flows and recovery optimism

Trekking through the markets

Indian markets continued to gain on persistent flows and recovery optimism

Benchmark indices scaled yet another high level with the help of persistent foreign flows and optimism over recovery gathering pace leading to earning upgrades. The level of activity last week was the highest ever. Market breadth was strong; volume very high; and volatility marginally higher. Metals and IT were the biggest outperformers; while FMCG was the only sector to close the week with some losses. Midcap outperformed the benchmark Nifty massively. INR was a tad weaker, while bond yields were marginally lower.

Hopes of a larger US stimulus kept the global markets buoyant

The global markets remained buoyant on the prospects of a larger US stimulus, as promised by the newly elected POTUS Joe Biden. The risk assets and industrial commodities rallied hard, with equities, copper and crude leading the way. Crypto currencies also had another strong week. Precious metals and bonds sold off. USD was a tad weaker, while EUR strengthened.

Outlook for the week

The outlook and trend for Indian markets continues to worsen gradually. It has reached a territory where short positions may be considered as risk reward has worsened materially. The momentum has however increased again, rather substantially; indicating materially higher probability of a sudden change in the trend in this week. The short term (weekly) and midterm (Monthly) trend and outlook for Nifty is firmly negative indicating an adverse risk reward ratio. The near term (daily) outlook and trend for Nifty is neutral. For this week-

· The day traders may avoid trading in 14130 – 14370 nifty range. The long positions may be held with a stop loss of 14190.

· For Bank Nifty The short and midterm trends are now negative, while near term trend is neutral. Day Trading may be avoided in 31870 – 32130 range. For all long position maintain a strict stop loss of 30470.