During the week gone by, domestic equities witnessed some profit booking, but they again bounced back in line with global sentiments. Global markets are hovering near their 2020 highs, and Nifty50 too is trying to imitate this trend in spite of the massive increase in Covid-19 cases and lacklustre economic activity. Given the inherent forward-looking persona of Mr Market, it has very well discounted events six to nine months ahead of time.

The major reason why markets seem to be in super-bullish mood is that it has already priced in that ground-level economic activities would normalise in six to nine months. This can be concluded that the market could see a correction only on the back of any major negative event, or if a wide disconnect between market-wide expectations of recovery and actual ground-level economic revival arises. Otherwise, so far so good!

Markets are expected to continue their momentum despite all adversities. Investors are advised to remain cautiously bullish around these times, especially when massive amounts of money are being raised from secondary markets.

Surprisingly, Axis Bank’s board kept the QIP floor price higher than the market price and even in such an uncertain scenario, it saw decent response. HDFC would also be successful in raising Rs 14,000 crore without any major dent to the secondary market. The way QIP pricing is being done and the way stocks are reacting in the secondary market suggest that there is a gargantuan amount of liquidity waiting in the system and markets still have the strength to move higher. Investors can continue to ride the rally as long as it continues.

Event of the Week
Commodities have started attracting a lot of global attention given the fact that a lot of helicopter money is floating around the world. This superfluous liquidity is being channelled not only to precious metals like gold and silver, but also to other metals and commodities too. Given the swift one-way rally in gold, one should be cautious in the near term but the prices are expected to inch upwards over the next few quarters. However, too much of bullishness in commodities may kick in inflationary pressure, which again could be negative in the longer term.

It is advised to allocate some portion of your portfolio to gold at least keeping next 3-5 years in horizon.

Technical Outlook
Nifty50 index continued to trade in the 10,950-11,300 range for the third straight week and has now gone into a pause. Bank Nifty remains relatively weak while midcap and smallcap indices have outperformed. As the rally in heavyweights has taken a pause amidst weakness in banking stocks, a consolidation is possible before the next up-move. We maintain a cautiously bullish outlook for the near term unless Nifty breaks below the 10,850 level,

Traders are advised to follow a buy-on-dips approach with the 10,850 level as strict stop loss.

Expectation for the Week
World’s largest economy, the US, is expected to finalise a second round of stimulus package in the coming week for the American people to fight economic fallout from the Covid-19 pandemic. This move is expected to lift overall sentiment of the US market as well as in markets across the globe. Accordingly, domestic markets are likely to get a booster from the stimulus clues and sentiments should turn positive.

Markets are likely to consolidate and move higher. Currently, domestic markets might seem immune to the global unrest, which is at an all-time high, given the aftermath of lockdown and economic distress. India may not be impacted for the time being, but a possible fallout on the economy still remains an overhang. Bleak quarterly performance of India Inc is failing to create any significant market trend.

Investors are advised to ride with the rally so long as it continues. Nifty50 closed the week at 11,214, up 1.3 per cent.