Nifty posts positive returns for 5th straight week; what should be investors’ strategy next week?

BSE Sensex and Nifty 50 continued to rally and added nearly one per cent gains this week. Sensex breached the psychological level of 45,000 on the upside for the first time in the history while the broader Nifty 50 index jumped above the crucial 13,250 levels. This was fifth consecutive week for the Nifty 50 where it managed to post positive returns. The broader markets too ended with healthy gains this week. The market rally was fuelled by newsflow related to COVID-19 vaccine, RBI MPC policy, GST collection in November and better-than-expected GDP numbers.

Events of the week: RBI maintained its status quo for the third consecutive monetary policy. The six-member MPC voted unanimously to keep the stance accommodative to facilitate the recovery in the economic indicators. The central bank also said that all the liquidity that it has injected into the market has achieved its target. Another event was that India’s GST collection crossed the Rs 1 lakh-crore-mark for the second consecutive month in November 2020. The up move in the markets was further supported by the news of acceptance of Pfizer-BioNTech COVID-19 vaccine by the UK government.

Technical talk: Nifty 50 index ended on a positive this week mainly due to buying in metal and auto stocks. In fact Nifty Bank index also posted gains for the fifth straight week, crossing the 30,000 level, after RBI upgraded its GDP target to (-)7.5 per cent from (-)9.5 per cent earlier for the current fiscal year. “In the coming week, Nifty 50 index would face major hurdle at 13350/13400 levels, which is nearby, however, the Bank Nifty should outperform and move to 31000 levels without any major efforts. The strategy should be to buy on dips with a final stop loss of Nifty 50 index at 13100,” said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.

India VIX: India VIX further cooled off by 5 per cent to 18 levels. Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd said that lower levels of volatility also suggest that bulls are holding the grip and any decline could be bought in the market.

What to expect in next week: Analysts expect a sectoral rotation theme in the upcoming week. Investors have been advised to accumulate FMCG, IT and Pharma stocks in a SIP format given their consolidation is underway. “Any negative news may take markets lower which would offer a buying opportunity for investors to pick up quality names,” said Nirali Shah, Senior Research Analyst, Samco Securities.