Last Updated : Dec 03, 2018 12:27 PM IST | Source:

Bulls dominated D-Street in 7 of the last 10 Decembers; will 2018 be any different?

The maximum gain was seen in 2008 when the Sensex rallied 9.1 percent. The second biggest gain was in 2017, when it rose 3.7 percent

Kshitij Anand @kshanand

The Sensex rallied about 5 percent in November to reclaim 36,000 and the Nifty reclaimed 10,800. If the momentum remains intact, the Nifty will likely hit 11,000 in the December series.

Anecdotal evidence suggests the rally is here to stay as bulls have remained in control of D-Street in December in 7 out of the last 10 years.

The maximum gain was seen in 2008 when the Sensex rallied 9.1 percent. The second biggest gain was in 2017, when it rose 3.7 percent. The third highest gain -- 3.3 percent -- was recorded in 2010.

Bears have managed to take control of D-Street in December just three times in the last 10 years. The Sensex fell a little over 6 percent in 2011, 3.7 percent in 2014, and 0.20 percent in 2015.

December chart 1

There could be some volatility due to the US Fed policy meeting, RBI monetary policy meeting, as well as the outcome of state elections, but with foreign investors back on D-Street, some of the macro headwinds have now become tailwinds.

"Nifty should be able to reclaim 11,000 in December series. RBI’s monetary policy on December 5 and state election results will be key to market movements. Our expectation is RBI’s policy will maintain status quo on rate hikes, which will be a breather," Dharmesh Kant – Head, Retail Research, IndiaNivesh Securities told Moneycontrol.

"Inflation is benign and a fall in crude oil prices along with a rise in rupee has turned macro headwinds into tailwinds for now," he said.

Encouraged by falling crude oil prices and a sharp appreciation in rupee, overseas investors have pumped Rs 12,260 crore in the Indian capital markets in November, making it the highest inflow in 10 months.

History suggests overseas investors have been mostly buyers in December in the last 10 years. Foreign investors have pumped money in Indian markets in December six times in the last 10 years. They poured Rs 24,000 crore in 2012, followed by Rs 15,000 crore in 2013. They had invested Rs 10,000 crore in 2009.

December chart 2

The foreign investors have been net sellers four times in December in the last ten years. In 2016 they pulled out more than Rs 8,000 crore followed by Rs 4,747 crore in 2017, whereas they withdrew less than Rs 1,000 crore in 2014 and 2011.

Technical Outlook

The Nifty outlook remains constructive as long as crude trades around $60/bbl and we do not see depreciation in the rupee against the US dollar.

Further volatility in the market could be caused by the outcome of state elections results, US Fed meeting as well as MPC meeting which is due this week. But, given the bounceback in November, it looks like the rally is here to stay.

“The near-term oscillators are positive. However, the medium-term oscillators display mixed signals, while the long-term oscillators of the index are in sell mode. Therefore, we treat the ongoing rise a countertrend rally with positive implications towards the range of 10,950–11,100,” Arun Kumar, Market Strategist, Reliance Securities told Moneycontrol.

“The USDINR breached the psychological zone of 70 and has given strong directional signals from various oscillators. It may attempt to appreciate towards 68.50–69.20 in near to medium term,” he said.

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First Published on Dec 3, 2018 12:27 pm
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