Bull-run may continue but these factors may spoil the party

While the bull run may continue in the market, the market has a lot of factors to focus on in the near-term, including Q3 earnings, macro prints, vaccine-related reports, global cues and the Union Budget 2021.

Unfavourable development on these fronts may spoil the party.

The market, at record levels, is brimming with positive sentiment. In the coming week, Nifty may attempt to touch 14,800.

"Continuation of bullish crossover of 20 DMA & 50 DMA on daily and weekly timeframe and sustainability above 5 DMA and 10 DMA suggests prices can trade higher towards targets of 'Flag classical pattern' on a higher timeframe, standing around 14,800," said Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors.

"Rising trendlines plotted using earlier swing highs are showing resistance near 14,600-14,800 zone. At the same time, the upper trend line of Andrew pitchfork is also standing near 14,800 marks which suggest the index has the potential to rally towards 14,800 levels. However, any dip below the line of parity, 5-week SMA and swing low standing around 14,050 will give an early sign of trend reversal," Kayyumi said.

Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities, expects Nifty to trade between 14,500 and 15,000 before the Budget.

"We expect the market to remain firm going forward because of the start of earnings season. Expect Nifty to go anywhere between 14,500 and 15,000 before the Budget," said Oza.

Oza highlighted that the focus will be on how IT stocks react after results as earnings growth of the frontline companies, except for Infosys is expected to be in single digit.

"The street is expecting IT stocks to sustain at higher levels because of the potential upward revision in future guidance. Overall, we expect Nifty50 to report 19 percent earnings growth in Q3FY21 with likely upgrades coming in sectors like automobiles, auto-ancillaries, metals & mining, cement, select banks and pharmaceuticals," Oza said.

Ajit Mishra, VP - Research, Religare Broking, believes the market will first react to the TCS numbers on Monday which came after the market hours on Friday.

He said the upcoming macroeconomic data combined with the signals from the earnings would largely dictate the market trend. Besides, global cues and progress on the vaccine drive will also be in focus.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, has a similar view on the market.

"Global cues will be watched closely for a further trend in the market. Investors would also track the vaccine rollout in India post the dry-run, the December quarterly results and the Union Budget on February 1. As the long-term market structure remains positive, we would advise investors to adopt a buying on dips strategy to accumulate quality stocks," said Khemka.

Even as the rally in the market is across sectors, analysts warn one should not be careless in such a market and focus on quality stocks only.

"We suggest continuing with a sector and stock-specific trading approach as we are seeing rotational buying across the sectors. Traders should limit their leveraged positions and avoid contrarian trades," Mishra said.

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