Stock Markets May Take A Breather After 6% Gain In 3 Straight Weeks: Analysts

Equity market benchmarks Sensex and Nifty rose more than 2 per cent from June 30 to July 3, rising for a third week in a row. The Sensex index added 850.15 points for the week to settle at 36,021.42, and the broader Nifty 50 benchmark gained 224.35 points to 10,607.35. While a strong buying interest in automobile, IT and financial stocks pushed the markets, losses in metal, pharma and select state-run banking counters limited the upside, amid a positive trend in global markets on data that rekindled hopes of a quicker economic recovery from the damage caused by the coronavirus pandemic than anticipated earlier. However, rising COVID-19 cases around the globe and back home kept the gains in check. In the coming week, domestic stock markets may halt the current trend before the release of key data and the onset of corporate earnings, say analysts.

For the week, automobile was the best sector, fuelled by optimism about a recovery in demand as companies reported monthly sales. The Nifty Auto index - comprising stocks of 15 manufacturers of auto and ancilliaries - gained 3.56 per cent.

"Market mood remained buoyant, bolstered by an uptick in activities and consumption," said Sanjeev Zarbade, vice president-PCG research at Kotak Securities.

The Nifty Bank and Nifty Financial Services indices appreciated 1.21 per cent and 2.67 per cent respectively in the five-day period. At more than 34 per cent, the financial services sector holds the maximum weightage in the Nifty.

Hero MotoCorp, HDFC, Mahindra & Mahindra, ITC and Adani Ports, rising between 5.22 per cent and 7.93 per cent for the week, were the top Nifty gainers. On the other hand, Coal India, Vedanta, Hindalco, Zee Entertainment, Bharat Petroleum and ONGC, closing between 2.20 per cent and 5.00 per cent higher, were the biggest laggards in the basket of 50 shares.

Nifty Top Gainers Vs Losers

"In spite of rising COVID cases the markets are driven by liquidity and are not stopping... not just in past weeks but gaining from 7,500 (Nifty) over past three months," AK Prabhakar, head of research at IDBI Capital, told NDTV.

The Sensex has moved 2,240.53 points - or 6.22 per cent - higher and the Nifty spiked 634.45 points (5.98 per cent) in three consecutive weeks.

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"Till the (Nifty) index doesn't break 10,190 on the downside, it is difficult to say what to expect in the markets in the coming days," he said.

Shares in other Asian markets moved higher as hopes of a recovery from the fallout from COVID-19 outweighed concerns about rising cases, as data showed China's services sector registered the best monthly expansion in more than a decade and a rise in US non-farm payrolls beat expectations.

"It was a good week for global equities as concerns over reports of a resurge in COVID-19 infections in the US were offset by improving macroeconomic data points as reflected by the strong non-farm payrolls data in the US," said Mr Zarbade of Kotak Securities.

Analysts say key macroeconomic data as well as the first of the quarterly corporate earnings will be watched closely for cues.

Back home, official data on industrial production and retail as well as wholesale inflation will be released during the coming week. IT major Tata Consultancy Services (TCS) will kick off the earnings season by reporting its financial results for the April-June period.

"We expect Nifty to take a breather around 10,750 level, after the three successive weeks of advances. Though the benchmark is inching higher gradually, the underperformance of the banking pack is still a major concern," said Ajit Mishra, VP research at Religare Broking.