Markets closed mildly in the positive zone on the last trading day of the year. Sentiment is buoyant. Nifty and Sensex both closed near all time highs. Elections and all major news flow were out the way and bulls had the upper hand through out the FII holiday season. It will be interesting to see at the dawn of the new year how markets perform going into the crucial January month.
Technically speaking, Nifty is near critical levels. 10500 needs to be broken decisively. Nifty is hovering near the zone but in unable to penetrate it. Twice has the index reversed from that area. Momentum seems to be indicating that it will break out and make a new high. Fatigue is seen although near the congestion zone. 10k becomes a rock solid intermediate support in the future. A decisive close and break out of 10550 will make a new bottom for the market. Base will shift a whopping 500 points upwards. Short term the bulls have some steam left. 10470 seems to be a good support.
Fundamentally, we are still in extremely overbought zone. Multiples are stretched and valuations in some stocks looks frothy. Such circumstances call for extreme caution in asset allocation. Forced buying of stocks is a strict no. Sitting on cash seems a smart choice. At historical high valuations one needs to wait for results and then take a deep dive. With results season underway it will be interesting to see where the markets head.
Sector watch – Metals is the strongest bet out there. Nifty metals after a steep correction is bound to hit new highs. Keep a watch on its constituents. Bank is a laggard. Nifty bank is still way below it’s all time high. This divergence is something market players are keeping a tab on. Nifty IT seems to have a clean break. Keep an eye on this space as some sparks are bound to fly.