Time for market to hit the pause button after recent bull run? Here's what top analysts think

The dream run of the market continued in the week gone by, too, when the Sensex and Nifty scaled fresh record high and traded in unchartered territory.

The Nifty50 closed above 13,700 levels while the S&P BSE Sensex touched 47,000 last week.

The S&P BSE Sensex rallied 861 points or 1.87 percent while the Nifty50 was up 1.83 percent for the week ended December 18 compared to the 1.6 percent gain seen in the S&P BSE Midcap index and 1.2 percent rise in the BSE Smallcap index in the same period.

Will the rally continue or the market will take a pause? Here's what top analysts think:

The risk-on sentiment prevailed across global equities as dollar weakness extended. The weekly price action formed a sizable bull candle with a small lower shadow carrying higher high-low over the seventh consecutive week, indicating the continuance of positive bias as Nifty formed a higher base and eventually resolved above the hurdle of 13,600, signifying inherent strength

The acceleration of upward momentum backed by the strengthening of market breadth and revolving sectoral participation makes us confident to revise our target to 14,200 by January 2021, as it is the confluence of:

(a) 138.2 percent external retracement of entire CY-20 decline (12,430-7,511), at 14,300.

(b) Implicated target of the last two years' major trading range 12,200-10,000, is placed at 14,200.

The aforementioned constructive view is further corroborated with the following observations:

(a) The Dollar index has breached the key support threshold of 90 for the first time since April 2018, auguring well for emerging markets.

We believe, continued weakness in the Dollar index will remain the key monitorable for extension of the ongoing rally as that would provide an impetus for the Nifty to resolve higher and head towards 14,200 in the coming weeks

(b) The market breadth has subsequently improved as currently, all Nifty components are trading above their long-term 200-day SMA, signifying durability of the current up-move.

(c) The gyrating sectoral traction signifies that the leadership is broadening, which augurs well for the longevity of the bull trend

Over the past seven weeks, the index witnessed a sharp rally of 2,240 points which hauled daily and weekly stochastic oscillator in overbought territory at 92 and 97, respectively. Therefore, we believe subsequent rally from here on would be in zig-zag formation wherein intermittent episodes of profit booking at higher levels can not be ruled out.

However, such a temporary breather should be capitalised as an incremental buying opportunity as the broader positive structure remains intact

The market witnessed some strong trends and an attempt to overcome the resistance level around the Nifty 50 Index level of 13,750.

Sustaining above 13,750 is the key factor from a short-term perspective. We believe maintaining above this level, the market may gain momentum and will open the gate for a movement till 13,990.

The momentum indicators like RSI, MACD are positive and market breadth is improved, further strengthening the view of a short-term bullish outlook.

The market remained buoyant in the week gone by on earlier-than-expected deployment of COVID-19 vaccines, impending US fiscal stimulus and decreasing domestic COVID-19 cases.

Going forward, we expect FII flows to the slowdown in the next two weeks as we head towards Christmas vacation.

Markets could turn volatile next week due to the monthly expiry and lesser participation from FIIs. We expect Nifty50 to consolidate between 13,000 and 14,000 levels by the end of this month.

In the coming week, markets are expecting positive news on the vaccine front in India which will further add fuel to the already rising markets.

Currently, indices seem to be in the hands of all-charged bulls and the mighty bear seems to have given up.

However, one cannot rule out mild profit booking on the way up. In the upcoming week, sectors such as defence and metals could remain in focus.

Any supportive policies by the government in these sectors could lead to strong moves in these stocks. As regards PSU lenders, any signs of tepid response in capital raising could lead to fractures in the newly-begun PSU rally.

With benchmark indices hitting all-time highs, traders and investors are advised to ride the momentum till possible but with caution.

Technically, the index still maintains higher bottom series which is broadly positive for the market. For the next few trading session, 13,650 should be the sacrosanct level for the trend-following traders.

Above the same, we can expect an uptrend continuation wave up to 13,935-14,000. On the flip side, dismissal of 13,650 could possibly trigger one quick correction leg till 13,500.

The larger texture of the market is still on the bullish side, so any short term corrections should be used to add quality IT, Pharma and FMCG stocks with the medium-term time horizon.

In the coming week, the market will be maintaining its focus on global events, as a decision on the US stimulus package and Brexit deal can be expected in the coming days.

RBI will be releasing deposit and borrowing data of the Indian banking system for the month of November.

Growth in business figures is expected and it will have a significant say in the forming of the banking sector outlook, for the coming quarters.

The market may continue its positive bias on the back of abundant liquidity, effective vaccine rollout and increasing prospects of Brexit deal and US Stimulus.

However, intermittent profit-booking cannot be ruled out as the Christmas vacation starts from next week and the FII liquidity could slow down.

The market could also be volatile given the monthly F&O expiry next week. Investors would also track Japan/China’s interest rate decision and US/UK’s GDP data next week.

While the week gone by quite clearly belonged to the real estate stocks, we expect the pharma and IT sectors to continue their upward journey during the coming week.

The coming week ahead of Christmas promises to be an interesting one.

Given the upcoming Budget preparations and thrust on reforms, the importance of good healthcare infrastructure has become a priority.

Import duties to curb dumping coupled with the PLI scheme should, in our view, help corporate India.

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