Gold, Rupee and Equity Markets Outlook II Details explained by ICICI Securities

Gold prices opened strongly higher with a gap on Thursday and prices corrected gradually for most of the session till low of  Rs 49323. Overall, prices remained supported in the last few sessions as the dollar slipped, with investors awaiting the passage of U.S. President Joe Biden's proposed $1.9 trillion dollar stimulus package. Hence, we expect Gold prices to remain positive towards Rs 49900 level in the short term.

The USDINR pair is still holding above its major Put base of Rs 73 ahead of settlement next week. We believe the current resilience of Rupee might continue in the near term and current levels may be utilized for creating long positions.  The dollar-rupee January contract on the NSE was at Rs 73.03 in the last session. The open interest increased by 0.7% in the current series while the February series saw an increase of over 50% in open interest.

Indian markets are likely to see a flattish opening amid some uncertainty about the near-term outlook for the markets following the run to record highs. However, global news flows and sector specific development will be key monitorables. Domestic markets ended lower tracking select BFSI and metal stocks amid profit booking. US markets ended mixed amid hopes of additional stimulus and faster vaccine distribution.
 
Equity benchmarks witnessed profit booking as Sensex approached the psychological mark 50000. The Nifty entirely pared intraday gains and concluded weekly derivative expiry session on a subdued note at 14590, down 54 points or 0.4%. Market breadth turned in favour of declines with A/D ratio of 1:2. Sectorally, all major indices ended in red weighed by metal and pharma.
 
Technical Outlook on Nifty:
 
The Nifty opened the session with a positive gap and scaled to a fresh all time high (14754). However, profit booking from higher levels dragged the index lower yet managed to hold Wednesday’s low (14518) and eventually recovered 110 points from the day's low.
 
Going ahead, ICICI Securities expects the index to endure its northbound journey amid rising volatility ahead of key major events of Union Budget and eventually head towards earmarked target of 14900 by the end of January. Thus, buy on declines would be the prudent strategy as the possibility of minor profit booking at higher levels can not be ruled out which would offer incremental buying opportunity to ride the next leg of up move towards 14900.
 
Eventually ICICI Securities expects broader market indices to relatively outperform the benchmark wherein small cap index would outshine. Key point to highlight is that the Nifty midcap index has surged to new life-time highs, whereas the small cap index is still 22% away from all-time high. Thus, ICICI Securities expects small caps to witness catch up activity.
 
In the coming session, ICICI Securities expect Nifty to hold Thursday’s panic low (14517) and trade with a positive bias amid stock specific action as markets proceed with the Q3 FY21 result season. Hence, use dip towards 14530-14555 for creating a long for target of 14641.