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Market Outlook

by Gaurav Garg (Head of Fundamental Research, CapitalVia Global Research- Investment Advisor)
Nov 20, 2020

Markets have been sustaining in the all-time high range for quite some time now and it has been observed that benchmark indices are quite comfortable at higher levels and are not eager to plunge down to take a correction. These levels were very much expected during the February-March of this year before COVID took toll on markets, therefore this all-time high was in fact long overdue. The present rally is well supported by volumes and hence can be considered sustainable. 

However, a minor correction till 12600 is expected by the end of November 2020 or December first week as Nifty seems to be quite over bought right now. There is good amount of Pressure on 12900 and 13000 levels and support is around 12700, the pull back from the support level may lead the rally up to 13100-13200. 

The Q2 results were quite promising indicating that the economy is getting back on track and steadily moving towards normalcy. The news of upcoming vaccine is sending positive vibes across the street. Another reason which will help sustain Nifty at these levels is the increased liquidity in the markets, with the easing monetary policy cheap money is now available which is finding its way into the markets, this situation is expected to persist as it seems that Central Banks across the globe are of the opinion to maintain an easing monetary policy for the foreseeable future.

The year 2021 seems optimistic for Markets as they have reached these levels after significant correction and with the economy getting back on its tracks further movement in the indices are expected. The year of 2021 is expected to smoothen the markets as outliers like COVID are expected to be taken care of. 

India as an economy might out-perform other emerging economies and might turn out to be one of the best investment opportunities for next one year. The news of successful tests of COVID 19 vaccines might further re affirm the bullish sentiments, which can be viewed as the early signs of an impending breakout.
 
The growing interest of FPIs is a positive sign, FPIs have invested nearly 73,700 crore, or 10 billion USD in 2020. This has led to an increased liquidity and optimistic views in the markets. Metal and Banking are the two sectors leading this rally of Nifty and the recovering economy and demand on both domestic and global fronts makes these sectors lucrative and hence the benchmark indices are expected to retain this rally.

As already mentioned the current rally owes mostly to consistent volumes which are quite generous as of now, to maintain this momentum Volumes will definitely play an important role. It is expected that Nifty may correct itself to 12700 to take a breather before carrying out on the rally.

The year end of calendar year is generally associated with exhausted volumes owing to the start of holiday season in International markets however the trend during the last year i.e. calendar year 2020 suggests otherwise, as Nifty seems to not exhausted Nifty is expected to attain the levels of 13300-13400 by the year end if it sustains above 13000.

With positive sentiments on the street and investment advisory firms from global leaders like Goldman Sachs and Nomura turning bullish on the Indian markets good participation from FPIs can be expected as Indian markets may be more lucrative for them owing to the start of Holiday season in International markets soon.