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Momentum Continues To Remain Bullish – Breakout Above 12,400 On The Cards

On the technical front, the breakout in small-cap indices became more apparent, as the Small Cap 100 index made a decisive close above the upper Bollinger Band on the weekly charts.

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The standoff between the U.S and Iran led to a topsy-turvy trading week for the bellwether index, which sank below the critical 12K mark on Wednesday, only to rebound strongly in the very next trading session as things appeared to cool off. Friday witnessed a strong trading session, with the NIFTY gaining 40 points by the close.

Friday’s positive sentiment was mainly driven by the fact that the Index of Industrial Production (IIP) for the month of Nov’19 came out to be 1.8% higher on a year-on-year basis, after three straight months of decline. Additionally, India's services sector activity gained momentum and touched a five-month high in Dec’19. The HIS Markit India Services Business Activity Index improved from 52.7 in November to 53.3 in December, highlighting the second strongest rate of increase in output in over a year, after July. Furthermore, the World Bank projected a 5% growth rate for India in FY20 but said it was likely to recover to 5.8% in FY21.

However, the improving IIP numbers should not necessarily be construed as a strong indicator of an economic revival, owing to the strong base effect as well as the weak numbers for consumer durables.

On the technical front, the breakout in small-cap indices became more apparent, as the Small Cap 100 index made a decisive close above the upper Bollinger Band on the weekly charts. It’s quite likely that a rally is on the cards for both small and mid-caps going forward.

The NIFTY continued to remain bullish, bouncing strongly from the lower Bollinger Band level and above the 20DMA mark. A breakout above 12,400 definitely appears to be the next big move for the index.

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