Indian Stocks Touch New High, Outlook for Next Week

Indian stocks touched new all-time high this week. The markets worldwide have witnessed strong gains, mainly led by the U.S. stock markets. Investors are upbeat and strong economic signals have improved confidence of funds managers about future market returns. Indian stocks touched new high and markets were trading strong with small declines in select counters.

Seventh straight weeks of gains Nifty to a new all-time high of 10906 while posting a phenomenal return of 800 points, almost 8% in last one month. Bank Nifty joined the rally to be in tandem with Nifty and other indices. A rally of more than a 1000 points with clear breakout led to a fresh all-time high of 26957.85. A clear breakout is seen on both indices with Nifty breaking the long channel drawn from troughs of 2010 while BankNifty after a long consolidation in last two month is standing to make a extend bullish move.

Nifty saw extended bullish move on the back of various cues that worked out well in favor bulls be it domestic or Globally, we are seeing a bullish momentum. SP500 made a record high with a close above 2800 while DJIA also pushed up. The data were mixed though there was a pickup in industrial production to 0.9% while capacity utilization also increased 77.9%. Asian cues were very positive since Chinese GDP inched up to 6.8% vs 6.7%. US unemployment claims which came at 220K was a big trigger for a late weekend bullish move for global markets. Domestic cues were also positive as Govt cut its additional borrowing requirement by 30K CR to 20000 Cr. It also suggests that fiscal deficit target may also be met which was widely expected to be out of line due to rising crude prices.

Fundamentally we have seen Nifty PE rise to 27.28, 1 below the historic highs of 2008. Sentiments were also driven by better quarterly numbers from Yes bank, Ultratech and Hindustan Zinc. The next crucial trigger for the market will be budget which will increase the volatility for sure and we may see wider moves. The historic volatility has been ranged from 50 - 8% and usually January has seen movements as big as +11% to -16%. This may certainly put jitters to directional or short-term traders as it will wipe out weak money.

Nifty has upward resistance at 11050 - 11100 in short-term while support is based on 10750 - 10800. Given the fact we may see higher volatility we can see range to be between 10700 - 11200 on the upside. This range should be crucial for nifty in coming days. Bank Nifty has next resistance at 27400 - 27350 while on downside point of polarity will be 26500- 26400.