Positivity prevails but market ripe for profit-booking; here are top analysts' views

The week gone by witnessed market benchmarks hitting fresh highs yet again, thanks to reports on vaccine development, stimulus talks in the US and strong FII inflow.

The S&P BSE Sensex climbed Mount 46K while the Nifty50 rose above 13500 for the first time in the week gone by.

The S&P BSE Sensex rallied 2.2 percent while the Nifty50 was up 1.9 percent for the week ended December 11th compared to the 0.7 percent rise seen in the S&P BSE Midcap index, and about 1.3 percent growth recorded in the S&P BSE Smallcap index in the same period.

While the market is teeming with positivity, some cooling-off cannot be ruled out at this juncture. Let's take a look at what top analysts think about the market's movement.

Nifty's weekly price action formed a sizable bull candle carrying a higher high-low over the sixth week in a row, indicating the continuance of positive bias.

Going ahead, we believe 13,600 would be the key level to watch, as only a decisive close above 13,600 would lead to the extension of the ongoing rally towards the 13,900 mark as it is the 161.8 percent extension of the consolidation range (13,200-12,800), projected from the breakout area of 13,200, placed at 13,847.

Failure to sustain above 13,600 would lead to consolidation in the range of 13,600-13,200 amid stock-specific action.

The index has seen a sharp rally of 2,044 points over the past six weeks, that hauled daily and weekly stochastic oscillator in the overbought territory (currently placed at 87 and 94, respectively), indicating the possibility of a minor profit-booking at higher levels as Nifty approached closer to our target of 13,600.

The formation of higher peak and trough on the larger degree charts (weekly and monthly) signifies a robust price structure which makes us confident to revise the support base upward at 13,200 as it is the confluence of 50 percent retracement of the current up-move (12,730- 13,579), placed at 13,155.

The overall trend of the market remains positive as it is showing resilience on the back of abundant liquidity, positive developments on the vaccine front and signs of economic recovery.

The market may, however, consolidate at these levels for some time given the stalemate in US stimulus and concerns over probable no-deal Brexit talk.

The market mood remains positive with sectoral rotation. Expect 13,000 to act as a major support for the Nifty50 in the near future with 14,000 as the next hurdle.

It is the laggards that are doing catch-up and PSU stocks are the ones that are coming in limelight now.

In the coming week, domestic markets will be waiting for major data points like inflation and import-export updates.

Although, an improvement in November inflation levels compared to the previous month is expected, it will still be at elevated levels.

The trend in global markets will be guided by developments in Brexit deal talks and updates on the expected US stimulus package.

Redemption pressure from domestic institutions and a possible hike in global volatility will be on the watch list.

On a daily basis, the Nifty has formed a long-legged Doji formation, which is an indication of the indecisive nature of the market.

The level of 13,400 acted as a crucial level for the market as the Nifty bounced back sharply after hitting the same in the last two days.

In the near future, 13,400 and 13,600 would be the trading range for the market. On the dismissal of 13,400, Nifty could fall to 13,200 levels, where it could take support of 20-day SMA. On the higher side, 13,600 and 13,750 would be major hurdles.

The momentum of the market is very strong and sectoral rotation activity is still clearly visible that would attract buying in the market at major supports.

On the higher side, take a contra-call of trading short on the Nifty with a stop loss at 13,800. Technology and financial stocks should be in the focus.

Markets will react to the macroeconomic data viz. IIP and CPI inflation in early trade on Monday.

We reiterate our positive yet cautious approach citing overbought conditions and suggest limiting leveraged positions.

It’s prudent to stick with a stock-specific trading approach and using dips to add quality stocks.

Though there is extreme optimism on the Street, sooner or later this outperformance may take a back seat and we suggest traders trade with caution as a profit-booking move across the equity class cannot be ruled out amid this extreme optimism.

Support and resistance in the short-term are now placed at 13,250 and 13,700.

The next week would be important from the FOMC standpoint as they have already hinted at keeping interest rates at sub-zero levels in order to aid the ailing economy. Further, any significant breakthrough in the long-awaited stimulus deal will weigh on the US economy.

Meanwhile, in India, primary markets may witness heightened activity with a number of IPOs and stake sales lined up by the government while the secondary market could take a breather.

Retail investors are advised to optimally use these IPO sunny times and wait for a correction in the secondary market before investing in equities.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.