Quarterly Numbers And Budget Will Dominate The Market In First Three Months: Epic Research 

Nifty ends the last week of the year with a new all-time high of 10552.4 and ends on a very strong note with closing at 10530. Nifty added 28.2% in 2018 while inched up 2.61% in last month as compared to negative returns since 2014 in December month itself. The cues were positive for the markets with many sectors contributing the gains while a few sectors which underperformed in last few weeks were specifically Banking, PSU Banks, and Financials. The last expiry also ended in a tight range though rollover figures were broadly encouraging while few sectors saw lackluster rollovers while outperforming sectors saw a impressive rollover figures.

Global markets opened the week after a long weekend on a positive note with DJIA inching towards record highs of 24900 levels while S&P too was near its records high. Though, the volumes were thin due to the festive season. A follow-up buying was seen due to almost an inline data of GDP at 3.2% and unemployment claims at the comfortable level of 245K along with Tax overhaul that has been passed in December. Asian Markets as well rebounded with major indices showing a positive close.

Nifty traded in a very small range for the last week of the year due to resistance at higher levels as the range was of a quarter a percent. Despite a new all-time high of 10552 Nifty stayed in a small range. The pattern formed on the weekly chart is a Hanging man which is a bearish reversal pattern in case a follow-up selling pressure is seen. As the lower shadow is twice of the body, it does depict a buying at lower levels. The range for the last week has made a line in the sand for both bulls and bears. The upside of the range comes at 10550 - 10560 levels and if it is taken out by bulls we can expect an upside momentum to continue to 10650 - 10660 while on the downside 10470 will be of very critical since negating that on a closing basis will give bears a low-risk entry for a short-term downward move. In the short term, we expect the broader range of market to be 10600 - 10400. post-Gujarat Elections and price structure the point of polarity is at 10400 where we have seen continuous consolidation and sustaining the same has given bulls an upward momentum.

As per the rollover data, we expect few sectors with better rollover percent average to perform better in January series like Logistics, fertilizers, Pharma, Textiles, and Metals. These sectors have seen higher rollover change for January series. We have also observed a buying momentum picking up in Pharma sector in December series and we expect select stocks from these sectors to perform well. in coming month we expect sideways to negative move in oil & Gas, banking, and telecom.

Automobile sales data will be out and markets will be critically examining the same since it can further lead the momentum. Auto Sales figures have seen decent growth with Maruti posting the record numbers and same is expected. This space can perform well in coming months but a stock specific approach should be applied to stocks like Tata Motors which is coming out for a long consolidation can be added to the portfolio. Mahindra and Mahindra is another stock that can give good returns as it has given a decisive breakout on longer horizon chart and may add 5 - 8% in January series.

For 2018, one of the most important aspects will be the quarterly numbers as we will be kicking off the earnings season. Q2 numbers were majorly in line with most of the companies giving the two digit numbers and is expected the same in Q3. We are expecting the Q3 numbers to be somewhere in the range of 14 - 16%. Any slump in these specifically from heavyweights will be a surprise since we have seen the revival in demand in last 3 month across sectors post GST implementation. Post GST, we have seen a revival in GDP and improvement in Infrastructure activity along with Industrial production. Inflation has seen a rise but is still below the comfortable mark of 4%. The limelight for first three months will be budget and how it gives a roadmap for next fiscal year as well.

Crude may continue to rise and we expect some hurdle in prices at $62 mark but breaching that we see additional gains of 10 - 15% in this commodity. Though it acts as a major part of the basket and has a direct impact on Fiscal numbers. This may further hurt the government through the appreciation of Rupee can minimize the effect to some extent. Though with strong macro numbers as an economy we can absorb crude oil prices but with incremental upside to around $65, as pointed out by RBI, can further increase inflation by 0.30 and may take it above 4% mark which in turn would have pressure on RBI. Also to some extent on Govt fiscal plan and policies.