Bulls charge Nifty, Sensex higher but analysts anticipate consolidation ahead

Bulls kept their hold over Dalal Street in the morning session on December 22, fuelled by positive cues from across the global markets. The rally resumed after the two benchmarks came off a volatile trade in the previous session, with profit-booking and buying-on-dips being the two key themes in the play.

Analysts, however, anticipate yet another breather in the bull run over the next few days as the year-end holiday season kicks off.

"With the absence of strong FII action in the coming days due to year-end holidays, the upcoming days are likely to witness a tepid momentum. However, we do not expect heavy selling in the market either as support from DIIs remain strong with buying-on-dips being the undertone," said Vinit Bolinjkar, head of research at Ventura Securities.

Analysts also see a slight correction in the market in positive light, especially after a stellar run-up seen through the month. "The market signal is that Wednesday’s sharp correction was a one-day event and not a reversal of the uptrend. This confirms the success of the buy-on-dips strategy, which has played out consistently in the ongoing rally," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

He, however, also pointed out concerns over the excessive valuations in the midcaps and smallcaps. "Retail exuberance and sustained flows into the midcap and smallcap mutual funds are driving this rally, which has slipped into a frothy zone. This broader market rally cannot continue for long."

Within the first hour of trading, the Sensex surged 231 points or 0.33 percent to 71,096.5, and the Nifty was up around 86 points or 0.40 percent to 21,340.70. The market breadth also favoured gainers as about 4 stocks climbed for each one that fell.

The broader market also witnessed strong buying with the Nifty Smallcap 100 and Nifty Midcap 100 gaining around 1 percent each.

On the technical front, Deven Mehata, research analyst at Choice Broking, pegged an initial resistance for the Nifty 50 at 21,400, followed by 21,500. In case of a correction, he expects the headline index to draw support at 21,200, followed by 21,150 and 21,100.

Sectorally, all indices traded with gains, but the Nifty Metal index emerged as the star performer, rising 1.5 percent, largely due to a fall in the dollar index below 102.

Among others, pharma, realty and automobile also witnessed strong buying action, with the three sectoral indices gaining over 1 percent each. Banking stocks also saw mild gains in the session.

"The charts of Bank Nifty indicate that it may get support at 47,750, followed by 47,600 and 47,500. If the index advances, 48,000 would be the initial key resistance, followed by 48,100 and 48,220," Mahata said.

He suggested investors to trade with a strict stop-loss for the long position at 47,500.