ICICI Sec sees Gold price heading to Rs 51800; Rupee-USD weakness expected; strength in Equity Markets set to continue

Gold Price Outlook: Prices rallied strongly in the last session as the dollar index slid to 2018 lows and prospects of tougher restrictions to combat a new variant of the Coronavirus kept safe-haven bullion in demand. Therefore, ICICI Securities expect gold prices to rise further towards Rs 51800 level in the short-term.

Rupee Outlook:

The US$INR pair remained largely range bound but closed near its two-month low on the back of broader weakness in the dollar and continuous inflow from FIIs. Below 73 levels, further weakness in the currency pair can be expected. The dollar-rupee January contract on the NSE was at Rs 73.20 in the last session. Also, the open interest in the January series increased marginally by 2% in the last session.
 

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Equity Market Outlook
 
Equity benchmarks started the week on a buoyant note tracking firm global cues. Nifty settled yesterday’s session at 14133, up 114 points or 0.8%. Market breadth remained sturdy with A/D ratio of 2.25:1. Sectorally, baring private banks, all major indices ended in green led by metals and IT.
 
Technical Outlook on Equity Markets:
 
The daily price action formed a small bodied bull candle with long lower shadow, indicating continuance of positive bias amid elevated buying demand as Nifty recouped 194 points from day’s low of 13954 and clocked new life high of 14148. The follow through strength above the psychological mark of 14000 backed by strong market breadth signifies inherent strength that makes ICICI Securities confident to reiterate their positive stance on the market and expect Nifty to head towards our earmarked target of 14200 in the coming sessions.
 
Key point to highlight is that,  over past nine sessions index has rallied more than 1000 points that hauled daily and weekly stochastic oscillator in overbought territory (at 91 and 97, respectively), indicating round of minor profit booking in the vicinity of our target of 14200 cannot be ruled out. However such breathers should be capitalized to accumulate quality stocks as the broader structure remains robust.
 
The formation of higher peaks in all time frames signifies robust price structure, that makes us confident to revise support base upward at 13800. Hence any cool off from hereon should be used as incremental buying opportunity as it is confluence of 38% retracement of current up move (13131- 14148) placed at 13749 and the bullish gap area of 28th December at 13749-13812 coincided with last week’s low of 13812.
 
Broader markets outshone the benchmark, as the Nifty Midcap and small cap witnessed follow through strength to past two weeks range breakout, displaying acceleration of upward momentum underpinned by strong market breadth as currently 97% components of midcap and small cap indices are trading above their 200 days SMA compared to November reading of 90, signifying inherent strength and durability of the current up move.