Stock Market, Currency and Gold: Where does the money making opportunity lie? ICICI Securities View
ICICI Securities believes that a decisive close above 13200 would open the doors for the next leg of up move towards 13600 in coming months. However, failure to close above 13200 would lead to consolidation in the broad range of 13200-12800 amid positive bias, as weekly stochastic oscillator has approached overbought territory (at 93) after 14% rally seen during November 2020. Hence, any temporary breather from here on should be utilized as an incremental opportunity to accumulate quality stocks.
Stock Market, Currency and Gold: Equity benchmarks concluded yesterday’s session on a flat note amid elevated volatility. The Nifty ended the session at 13114, up 5 points. The market breadth remained sturdy with A/D ratio of 1.4:1. Sectorally, metal and auto outshone while financials took a breather.
US$INR December future reverted from lows in the last session despite dollar weakening and continued FII flows in equities. We believe higher levels of 74.20 should act as resistance and these can be utilized for shorting the pair. The dollar-rupee December contract on the NSE was at 74.03 in the last session. The open interest rose 13.6% for the December series contract.
Gold and Silver Outlook:
Prices did not sustain at lower levels and rose strongly during most of the session till a high of Rs 49112 yesterday. Prices have been recovering strongly in the last two sessions supported by a soft dollar while signs of progress in discussions over a new US Coronavirus relief package bolstered bullion's appeal as a hedge against possible inflation. Therefore, ICICI Securities expect gold prices to rise further towards Rs 49200 level in the short-term.
The daily price action formed a small bodied bear candle with a long lower shadow, as fag end buying demand helped the index to recoup intraday losses (recovered 140 points from day’s low) and end the session on a flat note. As a result, the index managed to hold Tuesday’s low (12963), indicating continuance of positive bias
Key point to highlight is that, despite elevated volatility the index has managed to maintain a higher low formation, signifying inherent strength, which makes us confident to reiterate our positive stance and expect the Nifty to head towards our earmarked target of 13200 in coming sessions. ICICI Securities believes that a decisive close above 13200 would open the doors for the next leg of up move towards 13600 in coming months. However, failure to close above 13200 would lead to consolidation in the broad range of 13200-12800 amid positive bias, as weekly stochastic oscillator has approached overbought territory (at 93) after 14% rally seen during November 2020. Hence, any temporary breather from here on should be utilized as an incremental opportunity to accumulate quality stocks.
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ICICI Securities expect broader market indices to endure its relative outperformance as both Nifty midcap and small cap indices continued to march northward after resolving out of their three year falling channel breakout, signifying resumption of major up trend that has been underpinned by strengthening of market breadth, as currently average 92% components of Nifty midcap and small cap indices are trading above their long term 200 days SMA compared to last two week’s reading of average 86%. This development makes us confident about durability of ongoing up move.
Structurally, the current up move in Nifty is elongated compared to Sept-Oct rally (as shown in the chart) which has been accompanied by broadening of sectoral participation from growth to value sectors. Quality of leadership makes us confident about the sustainability up trend.
Therefore, ICICI Securities maintains support base at 12500 as it is confluence of:
1) 38% retracement of current up move (11535- 13145), at 12530
2) November 10 positive gap (12461-12475)
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