New Delhi: Domestic equity markets ended the year 2021 on a higher note as benchmark indices registered decent gains after a volatility of two days amidst the rising cases of Omicron and thin trading season.
Benchmark indices, Nifty50 and BSE Sensex, added over 2 per cent each during the final week of 2021. The broaders markets outperformed the headline peers as BSE midcap and smallcap indices zoomed 3 per cent and 4 per cent, respectively.
On the sectoral front, all the indices ended the year on a higher note with healthcare, IT consumer durables and auto being the top gainers during the week.
It was a good week for the bulls where Nifty and Sensex managed to clock more than 2 per cent gain amid low volume. The market will have a lack of global cues next week and volumes will be on the lower side where domestic cues may dominate, said Santosh Meena, Head of Research, Swastika Investmart.
In the coming week, markets will react to India’s PMI data, auto sales numbers and covid scenario across the globe. On the global front, US FOMC minutes of meeting and OPEC meeting will be keenly watched by traders.
“If we look at the data, then FIIs are still net sellers. However, selling has come down whereas DIIs are continuously supporting the market. It will be interesting to see how institutional investors will approach the market in the new year,” Meena added.
Below are the key factors that may guide market this week:
Covid scare
The latest spike in the Covid-19 cases in the country has kept the investors on their toes. The new Omicron variant is highly contiguous and hit the sentiment badly on Dalal Street. However, if the numbers continue to rise, then another series of curbs, restrictions and lockdowns is on the cards.
India has been registering a fresh spike in Covid cases, with a severe rise in the number of cases in major cities and states including Delhi, Jaipur, Maharashtra, West Bengal, Gujarat and Jharkhand.
India PMI numbers
India will release its PMI data for manufacturing and services, which will be critical to guide the markets. A higher than expected reading should be taken as positive and vice-versa. In November, India services PMI recorded a marginal drop, whereas manufacturing PMI hit a 10-month high in November as companies scaled up input buying.
Auto sales numbers
The markets react well to the sales numbers for the month of December of the auto companies. Sales of most Indian automakers recovered in December even as uncertainties around a shortage of chips persist. The passenger vehicles sales have shown some improvement in December, whereas two-wheelers were laggards.
Despite the near-term headwinds, the long-term outlook is largely positive, with most automakers anticipating a gradually improving chip shortage situation.
FII selling
Foreign investors have continued their selling lately, a trend which has continued for the last two months. Foreign investors have pulled out about Rs 87,000 crore from India’s secondary markets during this period. However, that has failed to diminish the enthusiasm of domestic investors and they will see how the trend goes ahead in the new month.
“I do not see the FII tide turning in January the way it has turned in the last 10 years. My bigger concern is we wake up in January and go back to sleep and nobody really cares,” said Pashupati Advani, Founder & Chairman, Global Foray in an ET Now Interview.
Opec meeting
The OPEC meeting is one of the biggest events of the upcoming week. OPEC and its allies are expected to maintain their existing policy of modest monthly increases in oil output with some concerns on the impact of the Omicron variant easing over the last couple of weeks. Crude oil prices have pushed higher after three of the last four OPEC+ meetings.
US FOMC minutes of meeting
The US FOMC minutes of meeting are released later this week (Friday) and Indian markets may move in tandem with global markets as investors try to read between the lines of the Fed’s action plan.
The Federal Open Market Committee will issue minutes of its November meeting. Investors will be looking for more details on the Fed’s mindset, including the decision to lower its GDP forecast and lift inflation expectations for 2021, 2022 and beyond.
Technical Outlook
The Nifty50 index closed on a positive note and broke above the falling resistance line. The next crucial resistance level is 17,650 and a close above this level will signal a continuation of the major uptrend, said Yesha Shah, Head of Equity Research, Samco Securities.
“As long as the benchmark index is concerned, the immediate support on the downside is now placed at 17,100. As long as it does not fall below 17,100, we suggest traders maintain a neutral to mild bullish outlook,” she added.
