Indian Stock Market Outlook for Upcoming Week by SAMCO Research

Indian Stock Market Outlook for Upcoming Week by SAMCO Research

Indian markets witnessed sharp correction on Thursday but buying was witnessed on Friday. Markets have been gaining ground and many quality stocks are already trading near their yearly highs. Markets have turned stock-specific as quarterly results have impact on the stock valuations. Indian stock market outlook by SAMCO Research follows....

Markets corrected sharply mid-week on renewed fear of rising COVID-19 cases and a bout of higher restrictions in advanced countries. US Election Day just being three weeks away, global markets have slipped into a wait and watch mode. Both political parties in US have substantive but diametrically opposite ideologies and policies to run economic affairs which the markets are waiting to discount. However, in any case, it seems that this time around, the elections may bring with itself a prolonged litigation on the balloting system. And this will eventually delay the second round of stimulus, further postponing the next wave of liquidity which may negatively impact global markets. In India, local markets too might witness profit booking in the near term and choose to move sideways. Therefore, it turns out that by this year-end, bourses are unlikely to witness fresh highs; instead a strong bout of profit booking may emerge. If this line of events turn out to be true, it will bring about a good buying opportunity for investors who are patiently waiting to accumulate quality stocks after a healthy correction.

More so, the buzz around IPOs now seems to be fizzling out since the listing of two hyped IPOs UTI AMC and Mazagon Dock witnessed a tepid response than expected post listing. This surreally portrays the market sentiment which recently turned neutral from bullish. Given any further deterioration in global macros and micros, the sentiment can turn bearish lasting till the beginning of New Year. In addition to this, there seems to be lack of support from domestic biggies (DIIs) which have rolled over their selling spree in the month of October. All these factors do not bode well for domestic markets.

Expectation for the week

Markets will await important results in the coming week from bellwethers such as HDFC Life, Avenue Supermarts, Britannia, and HUL to name a few. Their outcome along with the management's commentary will guide market participants about the pace of recovery in the formal economy post ease in restrictions. Select pockets especially hotels, travel and tourism are yet to recover because of their inherent disadvantage to operate in lockdowns and hence their results are expected to be muted. But given that stock prices have already rallied in the recent past, selling pressure is likely to emerge in these sectors. Markets may witness a sectoral rotation and are likely to remain range bound. Profit booking may emerge at higher levels. Overbought stocks should be completely avoided and oversold stocks can be considered for a medium term upside. Investors are advised to remain patient and wait for a serious correction before investing. Nifty50 closed the week at 11,762.5, down by 1.3%.

Event of the week

The Government tried incentivizing consumer spending to prop lackluster economic conditions through a slew of measures before the festive season. LTC Concession Scheme and other special spending schemes were announced for a large army of government employees to stimulate consumer spending. Whether this petty booster will move the consumerism needle or not will have to be seen but unfortunately the booster does reckon to be quite small and negligible compared to the mammoth size of our Indian economy. And this too may not strike the right chord in the markets as a sentiment booster.

Technical Outlook

Nifty50 posted another big bearish candle during the week, which indicates bulls have become tired and are unable to lift the index further. The recent sharp nonstop rally of more than ten days can be attributed to the highly optimistic herd behavior of the market, as majority of the participants were on the long side and hardly anyone was left to be long. So, there was only one direction for the market when there is no buyer left which is down. An additional boost from global indices of fears of a second wave of lockdowns posed as a negative trigger. However, we are still trading within the rising channel on a weekly chart and need to close below the channel support to confirm the end of the bullish trend. Traders are suggested to maintain a cautious outlook going ahead and be watchful of the market's reaction to the channel support. Support and resistance in the short term are placed at 11,300 and 11,900.

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