Market Analysis: Nifty's bullish momentum continues amidst global trends

New Delhi [India], January 2 : Asian markets displayed mixed trends influenced by contrasting Chinese data, while Wall Street observed a closure for the New Year holiday. In India, the Nifty and BSE Sensex aim to maintain their upward momentum following Monday's selling pressure.
The Nifty index kicked off December with a fresh breakout, experiencing a robust month characterized by bullish activity. It reached a new all-time high of 21,801, showcasing a remarkable gain of over 1,600 points throughout the month.
The upward trajectory remained resilient, with minor declines being swiftly converted into buying opportunities.
Across various sectors, notable buying interest was witnessed, especially in Energy, PSU and Private Banks, Realty, IT, Metal, Auto, and Pharma. Technically, the Nifty index demonstrated a range breakout spanning the last five months, concluding the calendar year with a strong closing.
The monthly chart revealed a Bullish Marubozu candle, closing at its higher band. On a weekly scale, the Nifty formed Bullish candles and maintained higher lows for nine consecutive weeks.
The overall chart structure suggests a likelihood of continued upside momentum.
For the Nifty to sustain an upward move, it needs to hold above 21,500 zones, potentially targeting 22,222 and 22,500 zones. Key support levels are placed at 21,500 and 21,200 zones.
Analyzing sectorial Relative Rotation Graphs (RRG), the Realty, Energy, and Infra sectors are positioned in the Leading quadrant, indicating a potential to outperform the broader market.
Meanwhile, the Pharma and Metal sectors are in the weakening quadrant, signalling a potential decline in momentum. Banking and FMCG find themselves in the Improving quadrant, suggesting that although strength is relatively low, momentum is likely to improve.
In the FMCG sector, leading companies are shifting their focus to direct distribution in rural markets as rural consumption lags behind urban trends. This strategic shift comes amid heightened competition from small and regional players.
Positive news emerged from the automotive sector as PVs and two-wheeler wholesales continued to grow in December, concluding the year on a positive note.
However, Maruti Suzuki recorded a dip in PV sales in December 2023 compared to the previous year, with PV sales at 104,778 units, down from last year's 112,010 units, except for utility vehicles.
In a notable economic move, India increased the windfall tax on crude oil while reducing taxes on diesel and aviation turbine fuel.
The windfall tax on petroleum crude oil increased to Rs 2,300 (USD 27.63) per tonne from Rs 1,300, according to a government notification.
The India VIX increased by 19.31 per cent from 12.69 to 15.14 levels in the December series. Heightened volatility resulted from call writers getting trapped, paving the way for bullish momentum.
Nifty witnessed a rollover of 79.5 per cent in the Jan series, in line with its quarterly average of 78.7 per cent. The increase in open interest of Nifty futures by 29.1 per cent on expiry-to-expiry, coupled with an 8.2 per cent rise in price, indicates the addition of long positions during the series.
The Jan series begins with an open interest of 13.83 million shares, compared to 10.71 million shares at the start of the December series.
The ongoing series suggests a "buy on dips" stance, supported by higher open interest activity and an elevated Put Call Ratio amidst increased volatility.