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Below is the Weekly Market Note June 17 By Mr. Ajit Mishra, VP - Research, Religare Broking Ltd

Markets ended two weeks of consolidation and gained nearly one and a half percent. The start was not very encouraging though and the index gradually inched higher as the week progressed. A steady recovery in global indices, especially in the US, played the catalyst in the surge. Consequently, both the benchmark indices, Nifty and Sensex, settled closer to the week’s high at 18,826.00 and 63,384.58 levels respectively. The majority of sectors were aligned with the move wherein realty, FMCG, metal and pharma were the top gainers however continued underperformance of the banking pack capped the momentum. Meanwhile, the broader indices outshined the benchmark for yet another week and gained nearly 3% each.

Going ahead, we feel the performance of the US markets will continue to play a key role. The US benchmark index, Dow Jones Industrial Average (DJIA), has finally ended a six-month long consolidation phase with a breakout while their broader indices and tech-heavy Nasdaq are already in full swing. We need sustainability in the move to prompt other markets to take note and inch higher.

We are now on the verge of making a new high after six months and indications are in the favor of prevailing tone to continue. However, the recent struggle in the banking pack may continue to cause intermediate volatility. We are eyeing the 19,100 mark in Nifty and expect 18,400-18,550 zone to offer the cushion in case of any profit taking. We thus recommend maintaining a “buy on dips” approach and focusing on the sectors, which are trading in tandem with the benchmark. Needless to say, the continued outperformance of the midcap and smallcap speaks volumes about the prospects but one should stick only with the quality names and strictly avoid penny stocks.

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