Undercurrent positive but market needs fresh trigger; here is what analysts' foresee for coming week

Key indices the Sensex and the Nifty closed almost flat for the week gone by but small and midcap space logged healthy gains.

The S&P BSE Sensex closed almost unchanged while the Nifty50 was up 0.35 percent. The S&P BSE smallcap index, however, surged more than 5 percent and the midcap index 2.6 percent for the week ended September 18.

Among the sectors, IT, healthcare and realty closed with gains of more than 5 percent. Most of the stocks in the IT and pharma space hit a fresh 52-week high.

While the undercurrent is positive, the market is looking for fresh triggers.

For the coming week, India-China tensions, COVID-19 cases, news on vaccine development and global cues will be on the radar.

Top market analysts express their view as to how the market may trade in the coming week. Take a look:

The market will continue its cautiousness with positive bias as investors will keep a close watch on the US and its response to the further stimulus demand to deal with the pandemic.

Some of the other key data that would be released would be the PMI for the US, the UK, the Eurozone and Japan and policy decisions in New Zealand.

On the domestic front, investors will track developments around India-China border issues.

If the weakness persists in the market, one should take advantage of it and add quality stocks in their portfolio as the overall long-term market trend remains positive.

FTSE's portfolio adjustment weighed on market sentiment in the latter part of the last week.

We think the hangover of FTSE adjustment is over and now the market should start exhibiting normal trading activity.

On the daily chart, the market has opened a small window of consolidation, which is between 11,300 and 11,600.

Buy the Nifty50 index if it falls to the lower boundary of the trading range.

The weekly price action formed a high wave candle carrying higher high-low, indicating positive bias amid elevated volatility as the index witnessed follow-through strength to last week’s pullback.

Going ahead, we expect the index to resolve higher and retest the August high of 11,800 in the coming weeks.

Any dip from here on should be capitalised as an incremental buying opportunity. In the process, we expect a broader market to endure its relative outperformance.

We expect the Bank Nifty to hold the key support threshold of 21,800-22,000 range as it is 80 percent retracement of the August rally (21,000-25,230), placed at 21,900 and pose a decent pullback which will drive the Nifty towards 11,800 in the coming weeks.

Currently, 72 percent constituents of the Nifty midcap and smallcap indices have been sustaining above their 200-day SMA compared to the past two weeks' reading of 65 percent, signifying a rejuvenating price structure that bodes well for the durability of the ongoing up-move.

Any temporary breather from here on should not be construed as negative instead it should be capitalised on to accumulate quality midcap and smallcap stocks.

While the largecaps are now in a consolidation mode, there is a lot of action in small and midcap stocks.

However, investors need to be selective in putting money in mid and small-cap stocks in view of their weak balance sheets and in sub-optimal corporate governance standards.

In the last three weeks, we had a couple of reality checks that we believe will be seen in moves going forward too.

One needs to remain cautious and should ideally avoid aggressive bets.

The banking space continues to be a spoilsport. The correction on September 18 was solely led by banking stocks as the Bank Nifty slipped below the key support of 22,000.

One needs to keep a track of how the heavyweight space behaves in the first half of the week.

The way some of the IT and pharma stocks took off last week was remarkable. One can still look to participate in such potential movers but should adopt a proper risk-management strategy.

With no major event lined up, the focus will return to global markets for cues.

Besides, the news update on the India-China LAC tussle and further developments related to COVID-19 will be closely tracked.

The scheduled derivatives expiry of the September month contracts would keep the traders on their toes.

We feel markets may consolidate further amid mixed signals and traders will have to align their trades accordingly.

The fresh breakdown in the banking index has derailed the possibility of a directional upmove in the Nifty, at least in the near future.

On the downside, a decisive break below 11,400 could result in a dip closer to the 11,200.

We maintain our view to focus on the selection of stocks and positioning trades on both sides.

We prefer defensive such as pharma and IT for long trades while a rebound in banking and financials should be considered for short positions.

Markets have been trading with uncertainty and the clear lack of direction to either side was visible in the previous week’s trades.

The worry was visible as investors would have cleared their positions heading into the weekend. Due to a lack of fresh triggers, the current uncertainty is expected to continue.

But any news with regards to the border tensions with China or global events can impact the markets on the downside.

Investors need to be cautious and watch for news-specific movements.

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