Market gained more than a percent in the passing week, driven by big newsflow such as TCS buyback announcement, hopes of Axis Bank merger, likely Vodafone-Idea deal, Bharti Airtel ‘s Telenor India acquisition, Reliance ‘s new tariff plans, consistent domestic liquidity support and weakness in dollar due to Federal Reserve’s cautious approach on a further rate hike.
The Nifty hit a fresh 52-week high of 8982.15 intraday on the last day of truncated week but failed to hold that level due to profit-booking ahead of the long weekend. The market was shut on Friday for Mahashivratri holiday.
After hitting a new one-year high on Nifty, experts feel this breakout may take the market higher from current levels. They expect it at a new high in the coming days as a lot of positive newsflow is lined up but maintained cautious approach after a 7 percent rally seen in the last five consecutive weeks.
According to them, further consolidation in telecom & banking space, reversal of negative effect of demonetisation on economic activity could help the market surpass its earlier record high.
Some experts believe the upside might continue till results of assembly elections (in five states) come out on March 11, wherein Uttar Pradesh is key for BJP. After a one-sided win in 8 out of 10 municipal corporations of Maharashtra, BJP is in a strong position and hopes are up for the party in Uttar Pradesh which sends to the parliament most number of representatives.
The hope of a 20 percent growth is keeping the market buoyant and strong domestic flows will continue to hold it, Navin Agarwal of Motilal Oswal Financial Services says, adding but risk reward from near-term perspective is not as attractive as before.
As the highest weekly additions in Nifty March options are seen at 8900 Put and 9100 Call strikes, ICICIdirect believes 8850-8900 would remain an important support zone. The pullback may be extended towards 9050 in the coming week, it feels.
Declining volatility pattern and 17 percent higher open interest at inception in March series (that will start on Monday) could provide further momentum to the index on the higher side, ICICIdirect believes.
On global front, “US President Donald Trump is likely to announce its tax plan in the next few weeks. While the FED minutes have pointed only a gradual rate hike which is positive for India as in the short term the weakness in USD is likely to continue,” Vinod Nair of Geojit Financial Services says.
Towards the end of next week (on Friday), the market may turn cautious ahead of GST Council meet that will be held on March 4 and 5.
Telecom stocks will remain in limelight next week due to consolidation in the sector, especially after Reliance Jio announced that it will start charging from April 1. First Idea Cellular will be closely looked at, as sources told CNBC-TV18 that the announcement of its merger with Vodafone is likely in the weekend. Idea rallied 77 percent since June 18 on hopes of a merger and the likely stake sale in merged entity to lower debt burden. The merged entity is likely to have debt of more than Rs 1 lakh crore, say sources.
(Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Chillicious.com.)
Media reports also suggested that Tata Teleservices may consider joining hands with Reliance Communications and Aircel to become a single entity.
PSU oil marketing companies (OMCs) will be in focus as they revise fuel prices by end of every month. Hence, aviation stocks will also be in action if OMCs revise aviation turbine fuel price.
Auto sales data for the month of February will be announced next week; hence, auto stocks will also be closely watched, especially after waning of demonetisation impact.
On the economic data front, the government will announce third quarter GDP numbers on February 28, which will be important to watch out for as the full impact of demonetisation will be seen in that quarter. The Gross Domestic Product grew 7.3 percent in Q2FY17 against 7.6 percent YoY. Infrastructure output data for January will also be declared on same date.