The week ahead should see the market pause for some breath after the stellar run up over the past five weeks. The macro data emanating this week was poor with GDP for FY 12 being revised to 6.9% & also IIP data for December coming at a dismal 1.8 per cent against 5.9 per cent in November 2011. The ‘Wall of Liquidity’ continued to absorb all negative news and we had another bout of sustained FII buying which was to the extent of Rs 3,397 cr. That withstanding markets will now see some consolidation and technically also we have reached important resistance levels.

Markets ended last week in the positive with Nifty gaining 1.05% & Bank Nifty again outperforming gaining 3.03 per cent. Also the Nifty touched a near 6-month high of 5427 where it now has gained 20 per cent from the low of 20 Dec 2011 of 4531.

The top three gainers were the BSE Reality up 5.79 per cent, BSE Consumer Durables up 5.7 per cent and BSE Metals up 4.12 per cent. In stocks top gainers were TTK Prestige up 40.43 per cent, IFCI up 27.54 per cent and HDIL up 17.98 per cent while top losers were Manapurram Finance down 19.88 per cent, Muthoot Finance down 11.84 per cent and Adani Power down 10.25 per cent. Technically, we have as written earlier encountered resistance at 5430 which was the 20 per cent rise from December lows. Market would look to consolidate here and will find support at the 200 daily moving average or DMA which is now at 5184.

Markets will now look to make the “Golden Cross”, which in technical parlance would be the very short term averages crossing the longer term one. This for Nifty would be the 20 DMA which is now at 5162 and would now look to crossover the 200 DMA at 5184. Bank Nifty where the 20DMA at 9757,would look to cross the 200 DMA at 9892.The “Golden Cross” is considered very “Bullish” and would see the Nifty go higher with the 200DMA now acting as support.

Globally markets have ended the 5-week rally with some much needed profit taking mainly due to Eurozone concerns with Greece again taking centre stage. We should see some more consolidation or profit taking continue this week also. The speed of the rally has made the “left out feeling” get even more spread which will see corrections being very shallow as every “Dip” would be a given buying opportunity. Also the fund flows indicate that even though some of the inflows would be “hot money’ and exchange-traded fund  dedicated which would see short term exit, the balance inflows now are longer term and would stay the course.

Highlight of the week was the outperformance of “high beta” sector stocks and also the “Bear Trap” where poor results actually saw big up moves in certain large cap stocks showing the strength of liquidity and  return of “Dumb/Momentum” money. This tells us that the classical case of doubting the rally has made most miss out. The debate over the “New Bull Market” or “Bear market suckers rally” will continue as more and more investors join in as prices move up.

Factors to watch:

1. Market consolidation with poor macroeconomics capping upside.

2. Global headwinds with Greece rollover of debt being major concern.

3. Inflation data or Bond Yeilds and Corporate Results.

4. The Golden Cross being formed.

5. Future FII fund flows after analysing poor macro data and weak corporate results. 

(Sanjeev Bhasin is an independent investment advisor based in New Delhi and an expert on NDTV Profit’s daily show ‘Buy or Sell’).