Volatility is largely expected in the coming short trading week as there is expiry of February derivative contracts on Thursday but upside can't be ruled out as investors closely watch assembly elections in five states, which are crucial for ruling party BJP, especially after demonetisation.
HDFC Bank, technology & pharma stocks helped the market retain its uptrend for the fourth consecutive week, offsetting initial weakness due to Tata Motors' disappointed earnings, and Federal Reserve chair Janet Yellen's comments hinting at a rate hike in next month's policy meeting on March 14-15. The Nifty gained 0.3 percent, taking the total gains in four weeks to 5.6 percent.
Volatility is expected in the coming truncated week on expiry of February derivative contracts Thursday but upside can't be ruled out as investors closely watch assembly elections in five states, which are crucial for ruling party BJP, especially after demonetisation.
Experts expect the Nifty to reclaim and hold 8900 level next week. The range could be 8750-8950. The market digested earnings, which were more or less stable despite demonetisation, and further upside in the market may largely depend upon the January-March quarter earnings (wherein the actual impact of demonetisation might be seen), GST implementation and state elections results due on March 11.
Though inflows are currently positive; rising yield, high valuation, volatility during state elections and favour in developed economies than to domestic market can impact performance in the short term, Vinod Nair of Geojit Financial Services said.
Additionally, increasing talks regarding hike in US interest rate, risk like increase in oil & metal prices may impact market sentiments, he added.
Given the decent rally during year-to-date, Nair feels the market is looking fairly priced at 17.3x one year forward P/E.
Technical research analyst, Nagaraj Shetti of HDFC securities says the underlying short and near term trend of Nifty is still positive, but the overall chart pattern of smaller and larger timeframe are showing red flag signal for bulls at the higher levels.
According to him, the formation of significant candlestick patterns indicates important top in Nifty around 8900-8920 levels in the next 1-2 weeks. Nifty moving below the support of 8700 levels could trigger fresh weakness, he feels.
The market will remain shut on Friday in the coming week due to Mahashivratri holiday; hence there will be short trading week.
On Monday, the market first may react to the outcome of 10th meeting of GST Council, headed by Finance Minister Arun Jaitley and comprising representatives of all states, on February 18.
IT major TCS will be closely watched on Monday as the board of directors will consider share buyback on February 20. Peer Infosys may also be in focus as cash on its books of over Rs 35,000 crore might trigger hope it will also consider a buyback in the near term. TCS has over Rs 43,000 crore cash on books.
Telecom operator Idea Cellular may also draw attention after a media report, quoting unnamed sources, indicated the British telecom major Vodafone has brought in Martin Pieters, former Managing Director and CEO of its Indian arm, to work on proposed merger of Vodafone India with Idea Cellular. The stock rallied 57 percent in last one month on merger talks.
Pharma stocks might see some profit booking on Monday. Reasonable valuations after correction on fears of Trump policies and positive vibes from USFDA pushed shares higher last week. Cadila Healthcare surged 25 percent after its Moraiya facility did not get any observations in inspection from USFDA. Sun Pharma rallied 8.5 percent on hopes of early USFDA clearance to Halol plant, which has been under warning letter since December 2015.
Among others, McNally Bharat will be in focus as it proposed to acquire 60 percent stake in Vedica for Rs 150 crore and debentures worth Rs 124.7 crore. Mangalam Drugs may react on Monday as its unit-2 audited by WHO & issued few procedural observations.