Sensex, Nifty log weekly gains, but will the trend continue? Here's what experts say

Despite Friday's losses market benchmarks ended the week with gains even as volatility remained high as the increasing COVID cases worldwide kept markets on edge.

For the week gone by, Nifty50 closed 1.52 percent higher compared to 1.59 percent rally seen in the S&P BSE Sensex.

The mixed performance was seen from the broader market space as the S&P BSE Midcap index rose just 0.81 percent while the S&P BSE Smallcap index closed with gains of 1.59 percent for the week ended July 10.

There are as many as 46 stocks in the S&P BSE500 index that rose 10-30 percent for the week ended July 10 which include names like NCC, GE Power, Jindal Steel & Power, IndusInd Bank, Equitas Holdings, Karnataka Bank, IRB Infrastructure, and Ujjivan Small Finance Bank, etc. among others.

Despite volatility, the market has been gradually going higher. Will the trend continue?

Let's take a look at what experts have to say about the short-term trend of the market:

Siddharth Khemka, Head - Retail Research, Motilal Oswal Financial Services

The market seems to be oscillating between greed and fear. On one side there is the hope of gradual economic recovery along with positive management commentary while on the other side, there is a fear of rising COVID cases leading to lockdown again.

The earnings season would be of key significance as it faced the maximum brunt of lockdown. Management commentary would be keenly watched out for and could keep the markets volatile in the near-term. We would advise investors to stay cautious while traders should keep booking profit at regular intervals.

Technically, Nifty formed a Doji candle on the daily scale which indicates an indecisive market stance. However, on a weekly basis, it formed a small body Bullish candle which indicates that the overall positive structure is intact. Hence, Nifty could extend its move towards 11,000 levels while support is placed at 10,650-10,550 levels.

Ajit Mishra, VP - Research, Religare Broking

In the coming week, participants will first react to the macroeconomic data and then focus would again shift to the earnings announcements. Needless to say, global cues and updates related to COVID-19 will also remain on their radar.

We have been seeing a gradual recovery, following upbeat global markets and favourable local cues. However, the concern related to rising COVID-19 cases in India and aboard is still lingering, and that, in turn, affecting the pace of economic activities.

We suggest limiting aggressive bets at current levels and awaiting clarity over the next directional move. As of now, the Nifty index is likely to trade within 10,500-10,950 zone next week and expect volatility to remain high on the stock-specific front.

We advise traders to keep existing leveraged positions hedged while investors should focus on upcoming earnings announcements for cues.

Dharmesh Shah, Head – Technical, ICICI direct

In the coming week, we expect the index to undergo healthy consolidation in the broad range of 10,900-10,600 amid stock-specific action as we enter the Q1FY21 result season.

On the weekly chart, Nifty continued to form a higher peak and trough, indicating positive bias as per the classic Dow Theory.

This, supported by improving the market breadth, signifies buying demand emerging at the elevated support base, that makes us confident of revising support base at 10,600 as a) it is the confluence of 38.2 percent retracement of ongoing up move (10,195 – 10,848), at 10,598 and b) during past three weeks on multiple occasions index reacted from 10600 zone.

Thus, as per the change of polarity concept, previous resistance of 10,600 would now act as support. Last week’s positive gap is placed in the range of (10,607-10,677).

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote

The participation in the rally is not broad-based, only a few heavyweights are driving the index higher.

The bank nifty index, which had been rising mutedly until now, has outperformed the benchmark index in the week gone by and financial stocks have contributed the most towards Nifty gains.

We believe the market is little stretched in the short term and expect a very limited upside. A break below 10600 will significantly dent the strength of the bulls.

Q1FY21 results are a bit slow but will be important to assess the impact of post lockdown scenarios and the extent of demand uptake in the economy.

Nonetheless, results are expected to be exceptionally weak but the commentary is expected to be strong enough which would keep the prices where they are in a narrow range.

In general, the bigger trend triggers will emerge on the back of how developed countries and foreign funds behave and respond to the post-COVID-19 dynamics.

Domestic factors may not have any major impact going ahead for the next few weeks. US markets are likely to remain rangebound but any severe crack can bleed domestic bourses as well.

As usual, investors are advised to stay on the sidelines and not indulge in FOMO buying but wait patiently. However, they should continue with their SIPs and regular investments in the market.

Analyst: Jyoti Roy, DVP Equity Strategist, Angel Broking

After the consolidation, we expect the Nifty to resume its upward march if global markets remain supportive.

Next week, markets will be watching out for key US economic data points like Industrial production and retail sales for the month of June 2020.

Markets will also be keenly awaiting regional manufacturing indices for the Month of July like the NY Empire State Manufacturing Index and the Philadelphia Fed Manufacturing Index.

While the industrial production and the retail sales numbers will most likely point to further improvement in the economy for the month of June, markets will be very interested in the regional manufacturing indices as it is indicative of more recent economic activities especially in the backdrop of a recent surge in infections in the US which has led many states to either defer or rollback their reopening plans.