The year 2021 will go down as a year when equity markets climbed all the walls of worries to hit fresh record highs. Despite the recent volatility due to the US Fed tapering, selling by foreign investors and COVID restrictions, benchmark indices closed with gains of over 22 per cent each.

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The S&P BSE Sensex closed with gains of about 22 per cent while the Nifty50 rallied 24 per cent in the year 2021. For the week ended December 31, Sensex, and Nifty50 rose by about 2 per cent each.

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The rally in the index was led by gains in healthcare, consumer durables, auto, consumer discretionary, and infra stocks while some selling was seen in power stocks.

On the broader market front – the S&P BSE Mid-cap index closed with gains of 2.5 per cent, and the S&P BSE Small-cap index closed 3.8 per cent up for the week ended December 31.

For the next week, monthly auto sales numbers for December, selling by foreign investors, macro data, as well as any increase in COVID cases are likely to impact sentiment, suggest experts.    

Bulls pushed the index higher in the last week of the year 2021 despite an increase in Covid related restrictions imposed in various parts of India as well as globally and selling by foreign investors.

Foreign Institutional Investors (FIIs) pulled out more than Rs 35,000 cr from the cash segment of the Indian equity markets – the third straight month of selling by FIIs.

“If we look at the data, then FIIs are still net sellers however selling has come down whereas DIIs are continuously supporting the market. It will be interesting to see how institutional investors will approach the market in the new year,” Santosh Meena, Head of Research, Swastika Investmart Ltd, said.

“If we look at the derivative data then FIIs' long exposure in the index future stands at 68% whereas the put-call ratio is sitting at 1.41 level that indicates a positive bias.  If we look at the OI (OPen Interest) built up, then put writers are looking confident in 17200-17300 area while there is no major build up in call option side till 18000,” he said.

The market will react to the monthly auto sales data for December, and India Manufacturing PMI on Monday, followed by India Services PMI on Wednesday.

“The coming week marks the beginning of a new month and participants will be closely eyeing some crucial high-frequency data like monthly auto sales, India Manufacturing PMI and India Services PMI. Besides, updates on the COVID situation and performance of global markets will also be critical,” Ajit Mishra, VP Research. Religare Broking, said.

“Though the markets have been witnessing recovery for the last two weeks, it’s too early to say that we’re out of woods. The recent rise in COVID cases has prompted a few key states to announce restrictions and that may extend if the situation deteriorates further,” he said.

Technical Factor:

The Nifty50 rallied by over 2 per cent for the week ended December 31 and is trading above the 30 & 200-DMA, but below 50 & 100-DMA.

The index closed above 17350 levels for the week ended December 31. The big resistance for the index is placed at 17600 levels, and on the downside, 16800-17000 will act as a support.

“In line with our view, Nifty accelerated upward momentum after resolving out of intermediate resistance of 17250 mark. We expect the extension of the up move towards 17600 levels supported by broad-based participation in coming weeks,” Dharmesh Shah, Head – Technical, ICICIdirect, said.

“Going ahead, any dip from here on should be construed as an incremental buying opportunity as we do not expect the index to breach key support of 17000-16800 levels,” he said.

Shah further added that broader market indices continue to be resilient and is expected to extend outperformance in the coming weeks. In large-cap space, we like, TCS, HCL Tech, Titan, Sun Pharma, Ultratech Cement, Larsen & Toubro, DLF.

While in midcap space, Shah prefers Bharat Electronics, Vardhman Textiles, Zensar Technologies, Fortis Healthcare, National Aluminium, Gaberial India, SKF India, Sanghavi Movers, Canara Bank, Gokaldas Exports.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)