1st time ever! India’s benchmark index crossed monumental 13000 levels - Here is what Nirali Shah of Samco Securities opines

India’s benchmark index crossed the monumental 13000 levels for the first time ever on the back of buoyant sentiments. Wall Street too in agreement with the domestic behaviour steered through its latest milestone of 30,000 in Dow for the first time this week. Across the globe, market participants were revitalized by the improvement in the development of COVID-19 vaccines and announcement that the transition of power to US President-elect Joe Biden is finally commencing. Back home, markets witnessed its biggest monthly inflows from FPIs of USD 6.7 billion MTD making India the third-most preferred investment destination in Asia after Japan and Korea.

Nirali Shah, Senior Research Analyst, Samco Securities, says, "By inspecting monthly FPI flows for this year, it can be observed that FPIs frantically sold equities to the net tune of Rs. 65,817 Crs in March which marked the market’s bottom. November saw contrary behaviour with FPIs pumping in over Rs. 57,500 Crs in Indian equities when markets are at its all-time high. Given the massive amount of FPI inflows market participants should surely rejoice, however, it is time to be cautious too since the current liquidity and optimism-led rally is majorly driven by market sentiments. And during such a mad chase for momentum investors often disregard fundamentals. Taking a holistic view on FPIs and DIIs, it can be said that liquidity can still take markets higher, albeit any unpleasant event can cause corrections in bourses. Risk and reward are unfavorable for both traders and investors currently."
 
Event of the Week:

"A rejig in MSCI Global Standard Index effective November 30th and a possible increase in India’s weight in the global index led many international fund houses to undergo a massive rejig in their portfolios due to which India witnessed massive monthly inflows from FPIs this month. DIIs, on the other hand, have continued their selling and are expected to not forego that stance. With the MSCI rejig over it seems unlikely that the FPIs will continue to invest in India with the same aggression in the weeks ahead. Therefore, considering the net of FPI and DII behaviour going forward it seems likely that there will be pressure on D-Street going forward which might lead to a correction."

Technical Outlook:

"Nifty 50 closed the week with mild gains forming a spinning top candle at the rising channel resistance which hints that the rally is getting tired and may take a pause to consolidate its gains. Though the majority of sectoral indices closed in positive, Nifty metal and pharma remained the top leaders. Nifty bank which has been the major driver of the recent bull move, has slowed down in momentum and taken a back seat while pharma and IT seem to be taking the charge. Outlook for the short term is bullish but as the benchmark indices are trading overbought we suggest traders take a defensive stance and lighten the aggressive bets. Immediate support and resistance are now placed at 12750 and 13150, a break below the support may lead to a retest of 12400 and break above 13150 might open targets upto 13400."

Expectation for the Week:

"RBI’s MPC meeting is scheduled next week and market participants would want to take cues from the likely inflation trend and any upward revision of growth forecasts to plan their next move. There is a high probability that the RBI would maintain an accommodative stance given the economy is slowly recovering and facing inflationary pressures. Markets are not likely to show significant movement in either direction given that there is very little room for a rate reduction. Infact markets are expected to enter a holiday mood with no major directional moves in the weeks to come. Stock-specific sectoral rotations are likely to unfold in the near term. Investors are advised to increase their weights on IT, Pharma and resilient private sector banks which might see some traction. Nifty50 closed the week at 12,968.9, up by 0.9%."