Weekly Market Wrap: 7-week bull run completed on D-street. Are markets overbought?

It turned out to be yet another fabulous week for Dalal Street with frontline benchmarks ending at all-time highs. The Indian equity markets ended in green for the seventh consecutive week, backed by buying across sectors after the US Federal Reserve kept its key interest rate unchanged and signalled rate cuts next year. Besides better-than-expected growth in the October Industrial Production data as India’s industrial production hit a 16-month high in October, also lifted the market.

These signals led the BSE Sensex to surge 1,658 points, or 2.37 per cent, at 71,484 during the week ended on December 15, while the Nifty jumped 487 points, or 2.32 per cent, to 21,457. Sector-wise, the BSE Information Technology index surged the most (7.0 per cent) during the week gone by. While BSE Teck and BSE Metal indices have registered a gain of 5.6 per cent, and 4.5 per cent, respectively. While at the bottom was the BSE Healthcare index, which surged just 0.3 per cent.        

As many as 37 stocks in the Nifty 50 index delivered a positive return for investors in the week. With a weekly gain of 9.5 per cent, HCL Technologies emerged as the top gainer in the index. It was followed by Hindalco Industries (7.1 per cent), NTPC (7.0 per cent), Ultratech Cement (6.7 per cent), and Tata Consultancy Services (6.4 per cent). Tech Mahindra, Infosys, Wipro, SBI, Tata Steel and Adani Ports also advanced by over five per cent. On the other hand, Bharat Petroleum Corporation, Dr Reddy's Laboratories and Maruti Suzuki India declined 4.6 per cent, 3.0 per cent, and 2.9 per cent, respectively.  

Market Wrap:        

Vinod Nair, Head of Research at Geojit Financial Services said, the market surged to new highs, buoyed by positive indicators from both domestic and global fronts. “Robust domestic industrial production and manufacturing PMI, coupled with the RBI's positive remarks on India's GDP forecast, contributed to the bullish trend”. The ease in US bond yield and the expectation of multiple rate cuts by the FED in 2024 further fuelled market optimism.

He added that the Investors expressed confidence that clouds over US economic growth would dissipate in H2CY24, anticipating a soft landing facilitated by normalization in monetary policy. “The IT sector rallied 7.6 per cent this week in expectation of a rise in demand from the US, optimism about AI-based opportunities, and hope that the Fed will cut interest rates in 2024.

We expect a near-term consolidation in the market due to elevated valuations, concerns over El Nino, and a slowdown in world GDP”, Nair said.  

Technical Outlook:        

Subash Gangadharan, Senior Technical and Derivative Analyst at HDFC Securities said that markets surged higher on Friday after a gap-up opening. A surge in the last one hour ensured the Nifty ended with hefty gains and close to the highs of the day. Nifty finally gained 273.95 points or 1.29 per cent to close at 21,456.65. Broad market indices like the BSE Small Cap index gained less, thereby underperforming the Sensex/Nifty. Reflecting the positive sentiments, market breadth was positive on the BSE/NSE.

Technically, with the Nifty surging higher to new life highs, the bulls remain in control. Further upsides are likely once the immediate resistance of 21492 is taken out. Caution is however warranted for the near term as the 14-day RSI at 84.93 is in overbought territory. “14-week RSI is at 75.87, which implies that it is not extremely overbought and there is scope for more upsides in the intermediate term. Thus, any short-term corrections can be utilized to buy into quality stocks. Crucial supports to watch for weakness are at 21319-21235”.  Gangadharan said.