The BSE Sensex has recorded its longest gaining streak since 2007, with 11 straight days of gains, ending the week at new all-time high. The index gained 4.63 percent during the rally, with 1.86 percent coming in during the week gone by.
The week was characterised by not just a strong set of business updates from India Inc., but also rising optimism over global cues. Inflation dipped slightly and analysts are now seeing silver lining in even deficiency in the monsoon.
“Q2 (earnings) numbers will surprise most analysts,” said Dharmesh Kant, Head - Equity & Derivative Research, Chola Securities. He indicated that those who were expecting the earnings recovery to come only from fiscal second half onwards will have to recalibrate their expectations.
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The silver lining of the dry monsoon spell
“The good side of the lower end of the monsoon in August has been a completely dry spell, and during this dry spell most of the construction activities have picked up, which was not the case last year. So one month additional incremental benefits will play out for construction and allied companies. If you look at the automobile numbers for August, all companies reported a great set of numbers. Thus, automobiles, metals, infra, construction – these companies will report much better numbers in Q2,” he added.
Continuous domestic flows, especially from mutual funds, have been keeping the market buoyant even on days when foreign investors pull the money out. SIP flows have reached record levels in August. FIIs, meanwhile, have booked profits in September so far. They have pulled out a net Rs 4,768 crore from equities.
In these 11 sessions, equity investors have grown richer by Rs 13.81 lakh crore, reflected by the total market cap of BSE-listed firms, which rose to Rs 323.41 lakh crore. In just the week gone by, the market gain was Rs 2.46 lakh crore.
Interestingly, during this period most major global markets have remained rangebound. Both S&P 500 and Nasdaq 100 have remained flat in the last 11 sessions, and so has German DAX. CAC has risen about 2 percent, and FTSE 100 about 4 percent.
US Fed rate cut expectations resurface, rekindle hope in markets
“Besides firm global market cues, investors are anticipating a halt in rate hike by the US Federal Reserve in the next week's policy meeting amid moderating inflation, which would augur well for local markets already witnessing a strong upsurge,” said Amol Athawale, Vice President - Technical Research, Kotak Securities.
“A status quo on rate hikes would further bolster investors' sentiment as this would give a further leg up to the economy on hopes of softening interest rate stance going ahead. A drop in US treasury yields have resulted in a recovery in world equity markets and also had a rub-off effect on local markets.”
Sensex, Nifty and sector indices in the week gone by
Among the biggest sectoral gainers during the week was Nifty PSU Bank, which rose 7.22 percent, followed by Nifty IT and Nifty Bank. Nifty Realty was the biggest loser.
Among broader markets, Nifty Smallcap and Nifty Midcap underperformed with both indices closing with cuts. The selling comes amid concerns over froth in some sections of the market. Analysts have pointed out that there is a “mad rash” going in the mid and smallcaps and the stock prices have overshot fundamentals in a big way.
Among individual stocks in the Nifty 50 club, Bajaj Auto was the biggest gainer in the week, rising 8 percent. Grasim Industries, Bharti Airtel, Axis Bank and UPL were other big gainers rising 4-7 percent. BPCL was top loser, down 2 percent followed by HDFC Life Insurance, HUL and NTPC that declined about 2 percent.
Where is Nifty headed? Here’s what charts foretell
Technically, the Nifty continues to show strength. Strong put writing at 20,100 has further bolstered positive sentiment in the market, giving wings to bulls.
“We expect a positive tone to continue in the Nifty, with some intermediate consolidation citing a hurdle at 20,300 levels,” said Ajit Mishra, SVP - Technical Research, Religare Broking. ”Participants should maintain a “buy on dips” approach and look for stocks offering a favourable risk to reward ratio.”
Rupak De, Senior technical analyst at LKP Securities, said the trend is expected to remain positive as long as the Nifty remains above the 20,000 mark. In the short term, there is potential for the Nifty to move towards the 20,480-20,500 range on the upside, he added.
As of September 15, in the Nifty 50 index, 46 stocks were trading above 20-SMA, 41 above 50-SMA, 42 above 100-SMA and 45 above 200-SMA. Simple moving average (SMA) is a lagging indicator that shows price momentum.
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