2021 has begun on a solid note, with the markets now at a record high. Many investors continue to wonder whether the momentum will continue and the Sensex would breach the 50,000 points mark.
Auto numbers that have come in for the month of December have been very encouraging as well and so have global cues. Relentless purchases by foreign Institutional Investors is what is driving the markets currently.
"Global cues were positive as investors look forward to an economic recovery in 2021 after one of the most tumultuous years in memory for equities. The coronavirus pandemic continues to be the main focus for European markets, now that the U.K.'s separation from the EU was completed on New Year's Eve.
On the domestic side, strong FIIs inflows continue to support the positive sentiments. Nifty continued its upward trend on the second trading day of Jan 2021," Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd says.
FPI Inflows surge
|Net FPI inflows|
|Oct, 2020||Rs 14,537 crores|
|November, 2020||Rs 65,317 crores|
|December, 2020||Rs 14,537 crores|
"Technically, Nifty has to continue to hold above 13950-14000 zones to witness a fresh rally towards 14200 then 14500 zones while on the downside major support exists at 13850 and 13777 levels. Option data suggests a wider trading range in between 13700 to 14500 zones while an immediate trading range in between 13900 to 14300 zones. Volatility needs to sustain below 20 zones to support the bullish market setup and fuel the bulls with a higher market base," Khemka adds.
Will the market momentum continue?
The ferocious rally has surprised many, though there is some more steam left for the markets.
"Going ahead, the market momentum seen in the last couple of months is likely to continue on the back of strong global cues, sustained inflows, and improving macros trends. Further highest ever GST collections for December at Rs 1.15 lakh crore can add to the positive momentum. The December quarterly results and Union Budget around 1st Feb will be some of the key event for the market. As the long term market structure remains positive, we would advise investors to adopt Buying on Dips strategy to accumulate quality stocks," says Khemka.
Investors who are on the sidelines may have to wait long for any meaningful reaction to take place in the markets. At the moment it makes little sense to chase the momentum and investors would do well to book profits at higher levels.