BackMarket outlook: Earnings, Budget expectations, vaccine to keep traders busy this month
Year 2021 may be the period where one would see stock market and real economy realigning with each other.
PremiumDomestic bourses since late March 2020 has been rising steadily, climbing the wall of worry with a consensus rhetoric that economy is punctured by pandemic, diminishing consumer demand, job cuts, business model disruption, bankruptcies, etc. Regardless of all these Mr. Market have kept the spirit and soared higher reflecting what lies ahead. It is expected that year 2021 would set aside all the gloomy rhetoric around mounting worries as economy returns to normalcy. However, Mr. Market may not show the same kind of ebullience as they have already ran ahead of its fundamentals. Hence, year 2021 may be the period where one would see stock market and real economy realigning with each other.
Beginning of the new year may likely witness a healthy start at least in the initial couple of months wherein union budget, US new government policy initiative and overall vaccine efficacy would be the key impetus which will keep the participants’ sentiment elevated and markets’ bullish. Primary markets too are expected to remain hyperactive during this period. Investors are advised to predominantly stick to good quality large businesses rather than selecting second quality stocks on the basis of lower valuation or catch-up rally.
Event of the Week
Antony Waste Handling Cell closed around 30% over the issue price of Rs. 315 apiece upon listing marking yet another successful IPO debutant. Such exuberance on listing would certainly draw in more business houses to consider IPOs in the market and increased issuers would be excited to pile up the line of IPOs in first quarter of new calendar year. Such excitement in IPO party would largely strengthen the overall economy which would provide risk capital to equip entrepreneurs and businesses to navigate real economic growth. It would be pertinent to note that in the short-run this IPO party would swallow liquidity from the secondary markets and cool down the bulls’ party.
Technical Outlook
Nifty50 index closed another week on a positive note with a new lifetime high and almost all the sectoral indices contributed positively to the benchmark indices. PSU Bank and realty indices remained the top leaders. The market is continuing to trend higher as bulls are not considering loosening their grip on the short term trend. Similarly, the US and other emerging markets are rising on the back of high liquidity phenomena globally. However, a couple of days back Nifty made a gravestone Doji and spinning top pattern, which are signs of short-term indecisiveness. 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.
Expectation for the Week
In the coming week, Mr. Market would take cues from global economy especially the US wherein the political transition will witness its final leg of drama which would drive momentary market movements. With India Inc.’s result season commencing, quarterly performance would keep markets buzzing with and IT pack would be first hitting the markets which are largely expected to register fine show. However, one may note that expectation of decent performance have largely been discounted by the market. With the result season advancing, Mr. Market is likely to dance to the tune of budgetary expectation rather than buzzing quarterly performance. Investors are advised to accumulate quality businesses in IT, real estate and cyclical sectors.
Nirali Shah is senior research analyst at Samco Securities
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