Weekly Market Wrap: D-Street in supercruise mode amid strong macros, BJP winning key polls. What's next?

Extending their winning streak for the sixth straight week, Indian equity benchmarks ended the passing week with a gain of around three and a half percentage points, on strong macroeconomic data, high expectations of a U.S. rate cut in March, and the ruling Bharatiya Janata Party's win in key state elections in Rajasthan, Chhattisgarh and Madhya Pradesh. 

On the macro front, the GST collections jumped 15 per cent to nearly Rs 1.68 lakh crore in November on increased domestic activity and festive season buying. Some optimism also came with the latest data by the Reserve Bank of India (RBI) showing that India's foreign exchange reserves increased by $2.54 billion to $597.94 billion for the week ending November 24.

Besides, the RBI Monetary Policy Committee decided to keep the repo rate unchanged at 6.50 per cent.  

These signals led the BSE Sensex to surge 2,344 points, or 3.47 per cent, at 69,826 during the week ended on December 08, while the Nifty jumped 702 points, or 3.46 per cent, to 20,969.

Sector-wise, the BSE Power index surged the most (13.1 per cent) during the week.

While BSE Oil & Gas and BSE Bankex indices have registered a gain of 7.7 per cent, and 5.3 per cent, respectively. On the other hand BSE Healthcare index declined 0.5 per cent.

As many as 40 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a weekly gain of 23.6 per cent, Adani Ports emerged as the top gainer in the index. It was followed by Power Grid Corporation Of India (8.7 per cent), Bharat Petroleum Corporation (7.5 per cent), State Bank Of India (7.4 per cent), and ICICI Bank (6.8 per cent). HDFC Bank, NTPC and Larsen & Toubro also advanced by nearly six per cent. On the other hand, Divi's Laboratories, Hindustan Unilever and HDFC Life Insurance Company declined 2.9 per cent, 1.6 per cent, and 1.5 per cent, respectively.  

Market Wrap       

Vinod Nair, Head of Research at Geojit Financial Services, said the market achieved an all-time high, driven by robust domestic GDP growth. "Despite the RBI maintaining the policy status quo, an upgraded GDP growth forecast for FY24 (6.5 per cent to 7 per cent) boosted investor confidence. Measures to address the liquidity deficit, including the reversal of SDF & MDF facilities, positively impacted financials, leading to a 5 per cent gain in Nifty Bank for the week. IT, consumer, auto, and realty sectors performed well due to valuation comfort, festive momentum, and a strong uptick in residential sales. Mid and small caps continued to outperform, driven by a healthy economic outlook, strong Q2 earnings, and corrections in oil prices."

He added that Investors should be mindful that achieving the RBI's 4 per cent CPI inflation target may take time. Concerns arise from reduced rabi sowing and declining reservoir levels, signalling a potential rise in food grain prices. This impacted FMCG stocks negatively, contrasting with positive performances in most other sectors. 

What to expect next week

In the upcoming data-centric week, the focus will be on crucial releases, including inflation data from India and the US. “Indian inflation is expected to rise, while US inflation will remain steady. Indian industrial and manufacturing production is also expected, while consensus expects expansion. However, the outcome of the awaited Fed policy meeting will be pivotal in shaping market sentiments”, Nair said. 

Technical Outlook       

Amol Athawale, Vice President - Technical Research at Kotak Securities said that in the last week, the benchmark indices witnessed a stellar rally, the nifty ends 3.47 percent while the Sensex gained over 2340 points. During the week, the Nifty/ Sensex successfully surpassed the important resistance of 20,200/68,000, and post-breakout it intensified the positive momentum.  

On weekly charts, the index has formed a long bullish candle and it also holds a higher bottom formation on daily and intraday charts, which is largely positive. The market texture is bullish and any meaningful correction should be taken as a buying opportunity to add good quality stocks.

“For the index traders now, 20,800-20,700/69,250-69,000 would act as sacrosanct support zones while 21,200-21300/70000-70300 could be the profit booking areas for the short-term traders. However, below 20,700/69,000 uptrend would be vulnerable," Athawale said.  

For Bank Nifty, the short-term texture is bullish. “For the bulls now, 46,500-46,200 would act as a key support zone. If it sustained above the same, then it could rally till 47,800-48,000”, Athawale said.    

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