Nifty has entered uncharted territory

The market surged to a new record high on Tuesday as investor sentiments buoyed by robust monsoon outlook, robust earnings forecast and positive trade data.

The Sensex hitting a new all-time high of 39,364, while Nifty surged to a fresh record high of 11,810.95 intra-day. The Sensex surged 369 points to close at 39,276, while the Nifty ended at 11,787, up 96 points.

The advance-decline ratio was in favour of advancers. Of the 2,093 stocks traded on the NSE, 871 advanced, 856 declined, and 366 remained unchanged.

Volumes were about 20 per cent higher than recent average. Banks, auto, oil & gas, telecom, capital goods and consumer durables were in the limelight.

Market View

"We remain cautiously optimistic on the Indian markets and expect consolidation in the near term given the recent rally. Further, earnings outcome of the Nifty heavyweights (Reliance Industries and HDFC Bank) this week may provide further direction to the markets. On the global front, China GDP data, US-China trade talks as well as corporate earnings will provide cues to the investors. In addition, INR vs USD and oil price movement are the other key factors. We recommend investors to focus on fundamentally sound stocks and traders to keep stock specific approach, said Jayant Manglik, President - Retail Distribution, Religare Broking Ltd.

Technical View

Derivative analysts said a good amount of longs positions were build up in both the Nifty and Bank Nifty. In call options, unwinding was seen in 11,700-11,800 strikes. The highest open interest concentration for weekly series has now shifted higher to 11,900 from 11,800 call options, due to fresh build-up in 11,900 strike. On the flip side, decent writing was seen in 11,700-11,800 put options. In case of monthly expiry, 12,000 call writers looked intimidated and hence covered their positions. " This development in Nifty options is indeed a healthy sign for Bulls; thus, we expect extension of Tuesday's rally towards 11,950-12,000. Now, traders are advised holding their existing longs and use declines to buy ATM calls, said Sneha Seth, Derivatives Analyst, Angel Broking.

The rally was largely supported by positive sentiments on the back of FII inflows, muted crude prices and appreciating rupee.

"With recent breakout, we believe the Nifty is all set to test 12,000 in a matter of days. We may see some consolidation while it is also important for the market to sustain above 11,700 as well. We recommend buy on dips, said Mustafa Nadeem, CEO, Epic Research.

With Tuesday's bump up, the Nifty has confirmed yet another breakout and analysts expect this momentum to continue. "Now, since we have entered an uncharted territory, fresh high from hereon would just be a number now. For the coming session, 11,850 - 11,900 would be seen as next junctions and on the downside, Tuesday's gap area of 11,731.55 - 11,648.25 is now likely to act as a strong support zone," said Jayant Manglik, President - Retail Distribution, Religare Broking Ltd.