Market This Week: IPOs, US GDP, FII Flows, BoJ Policy, RBI Minutes Among Key Factors To Dictate Sensex, Nifty

After a week-long bullish mood, Sensex and Nifty will be influenced by a host of factors during the trading sessions from December 18th to 22nd. The primary market will continue to be flooded by IPOs in both mainboard and SMEs, while the foreign funds flow trend will be keenly watched. Among economic indicators, at home, RBI's monetary policy minutes will give further clarity on the rate cuts stance in 2024, while traders broadly in the Asian market will also eye the Bank of Japan's policy decisions. Further, on a global front, Santa Rally will also have its share in setting a tone to market over the celebration of Christmas and New Year.

Last week, on Friday, Sensex and Nifty 50 touched new heights. The 30-scrip benchmark hit a new lifetime high of 71,605.76 before ending at 71,483.75, up by 969.55 points or 1.37%. Meanwhile, the 50-scrip benchmark touched a new record high of 21,492.30, before closing at 21,456.65 up by 273.95 points or 1.29%.

In the trading week from December 11th to 15th, Sensex skyrocketed by a whopping 1,527.26 points or 2.18%, while Nifty 50 jumped by 481.50 points or 2.30%.

Vinod Nair, Head of Research at Geojit Financial Services said, "The market surged to new highs, buoyed by positive indicators from both domestic and global fronts. Robust domestic industrial production and manufacturing PMI, coupled with the RBI's positive remarks on India's GDP forecast, contributed to the bullish trend. The ease in US bond yield and the expectation of multiple rate cuts by the FED in 2024 further fuelled market optimism. Investors expressed confidence that clouds over US economic growth would dissipate in H2CY24, anticipating a soft landing facilitated by normalization in monetary policy. The IT sector rallied 7.6% this week in expectation of a rise in demand from the US, optimism about AI-based opportunities, and hope that the Fed will cut interest rates in 2024."

Meanwhile, from December 1st to 17th, foreign portfolio investors (FPIs) have already pumped in massive Rs 42,733 crore in Indian equities. More inflows are likely to follow suit in the remaining days of December.

Foreign investors' activity, robust response in IPOs, healthy growth prospects, expectations of rate cuts, and bets ahead of the onset of Q3 earnings season -- could seal the deals for Sensex and Nifty 50 for crossing the 72,000 and 21,500 mark. However, the possibility of a correction in the domestic market cannot also be ruled out as both Sensex and Nifty 50 are expensive in emerging markets. Investors may cash in gains.

Ajit Mishra, SVP - of Technical Research, Religare Broking said, "Markets extended gains for the seventh consecutive week and gained nearly two and a half per cent. The tone was sideways in the benchmarks for most of the week however they resumed an uptrend in the final sessions, thanks to upbeat global cues. Consequently, both the key indices, Nifty and Sensex, settled around the week's high at 21,456.60 and 71,483.70 respectively. All sectors participated in the move and ended in the green wherein a sharp surge in the IT majors was the key highlight. The broader indices also edged higher and gained in the range of 2.7%-3.3%."

He added that apart from favourable domestic cues, a steady up move in the US markets has been playing a catalyst in maintaining the prevailing trend. The key index, the Dow Jones Industrial Average (DJIA), has reclaimed its record high after two years and we expect the tone to continue. It can gradually inch towards a new milestone of "39,000" and is likely to find support around the 36,300-36,600 zone in case of any dip.

Moreover, Prashanth Tapse, Senior VP (Research), Mehta Equities said, there is a lot of enthusiasm amongst the investors, especially foreign investors, who are pumping funds into domestic equities over the past few weeks post the state election results. Political stability and hopes of a continuation of reforms going ahead coupled with the US Fed's dovish stance on rates, falling bond yields and sliding crude oil prices has improved the sentiment. However, due to overbought technical conditions, the benchmark may consolidate in the near term but that said, the near-term outlook for the market continues to be in favour of the bulls.

However, Nair expects a near-term consolidation in the market due to elevated valuations, concerns over El Nino, and a slowdown in world GDP.

To traders, Mishra said, the rotational buying across the key sectors has been pushing the index higher with marginal correction in between. And, all indications are in the favor of ongoing trend continuing and we expect the Nifty to inch towards 22,150 levels. Traders should continue with the "buy on dips" approach, with the support zone now around 20,700-21,000 levels. A sharp-up move in the IT and banking heavyweights has strengthened our favourable view while others are also contributing on a rotational basis. Traders should align their trades accordingly and stay selective in midcap and smallcap space.

Key announcements of the US' Q3 GDP figures, Bank of Japan's monetary policy and RBI's latest monetary policy minutes are scheduled later in the week.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.