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Market bullish, but earnings will decide course from here on

Q3 earnings season will kickstart and all eyes will be on results of TCS and Infosys

Nifty ended up for a fifth consecutive week making a fresh all-time high 10,566 while it closed on a very strong bullish note at 10,558. There were multiple factors that played out for bulls this week not just on global but on the domestic front as well. This is a fifth positive close while first of the year.  A consolidation was observed in first two days due to lackluster cues post a holiday season while buoyant global markets lead the way.

Global cues were very positive for the week and just what the exhausted bulls needed to boost the momentum. Global indices rallied on better than expected US numbers of ADP Non-farm employment change while a further tightening of rates also charged the bulls for coming few days. Better than expected US PMI data along with comfortable levels of unemployment claims took Dow Jones to record highs. Euro zone PMI Data which was best in the last couple of years also boosted the morale. Asian markets were also seen an opening on a positive note and carried the same momentum throughout the week.

Domestic cues were also positive on the back of PMI Services data which was much better than expected at 50.9. This also showed a rebound as compared to November and erased some concerns left over effect of GST implementation. Action on govt’s banking recapitalization plan with the issuance of Rs 8,000 crore for select weak banks to improve Capital adequacy lift the sentiment and bank nifty joined the momentum which was underperforming or last few weeks as compared to the Nifty50.

Nifty recouped losses to gain the momentum coming out of a narrow range and inch higher taking the support of Short-Term EMA and closing for a fifth positive week. This was due to technically a rebound in major and heavyweights banking shares like SBI and HDFC, while sectors which were performing in last few weeks like auto, metals and FMCG further gained the momentum.

In the short term, Nifty has resistance at 10600 – 10650 while support which was previously placed at breakout point of 10400 is now at 10480. A breach on the downside will give some strength to bears while the momentum above that remains in favor of bulls for an upside to 10650.

For coming week as earnings season will kickstart and all eyes will be on results of TCS and Infosys from the IT sector and their guidance and will be under the crucial due to depreciation in Dollar in the last quarter against Rupee and few basket of currencies. Private bank player IndusIand will also report numbers and will set some tone for Pvt bank players which have just joined the bullish run.  Foreign exchange reserves data has been on a rise and may not disappoint given the upgrade in ratings of the economy recently.

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