Sensex, Nifty may continue to gain next week; bulls refuse to loosen grip, F&O rollover shows

Domestic equity indices continued to march higher during the bygone week as they marked the end of the year and the beginning of a new one. S&P BSE Sensex now sits at 47,868 points while the broader 50-stock NSE Nifty is at 14,018 points. Sensex gained 607 points or 1.29% in the last five trading sessions while Nifty added 155 points or 1.12%. The week also marked the end of December, where Nifty galloped a massive 909 points and Sensex gained 3,213 points. Foreign Institutional Investors (FII) continued to pump money into domestic securities as India remained one of their most favoured investment destinations. 

Investor wealth jumps: In the last 5 trading sessions investors got richer by Rs 4.09 lakh crore. The market capitalization of all BSE Listed firms was Rs 185.18 lakh crore at the end of the previous week and at the end of the last trading session of this week the same jumped to Rs 189.27 lakh crore, translating to an increase of Rs 4.09 lakh crore increase.

Foreign flows: Inflows from FII continued to inch higher this week. FIIs bought domestic equities worth Rs 7,402 crore in the last 5 days. With this, FII buying the equity segment for the month of December stood at Rs 62,016 crore, breaking the record of November. “In spite of lesser participation from FIIs the Nifty-50 gave a strong closing on the monthly expiry day. The robust FII flows of ~US$ 7.3 bn in December and strong closing on expiry indicates bullish rollovers for January expiry,” said Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities.

Rollover analysis: Market-wide rolls were at 93% against the three-month average of 93%. “The open interest in the Nifty has increased compared to the last month at inception. The January series is starting with open interest close to 11.8 million against 11.4 million shares seen in the last series. Nifty January futures added almost 2.8 million shares during the settlement trade,” said ICICI Securities. FIIs index futures long/short ratio for the January series starts at 3.1x in the favour of bulls.

Earnings season coming: The coming week marks the beginning of the earnings season. “The trend in the market starting next week will be based on the upcoming corporate earnings release for the 3rd quarter,” said Vinod Nair, Head of Research at Geojit Financial Services. TCS results are scheduled for January 8. 

Global watch: With the stimulus package being approved in the United States and Joe Biden’s take-over of the White House inching closer, investors will be keeping a close eye on the US stock markets. Across the globe, vaccination drives have begun which is likely to impact global investment decisions from here on.

What do the charts say: Nifty closed above 14,000 on Friday for the first time ever in history. “The market is continuing to trend higher as bulls are not considering loosening their grip on the short term trend,” said Nirali Shah, Senior Research Analyst, Samco Securities. “The low point of Doji pattern i.e. 13860 can be watched as immediate support and any break below the same can be taken as a cautionary sign for mild profit booking as the market is sitting on heavy gains. Until then traders are suggested to maintain a bullish bias,” she added.