How do you see the stock market movement on 05th January and do you see the positive trend of Tuesday continuing?

That is right that the markets have been in the midst of a strong rally for the last 3 days starting off with the last trading day of 2021. The Nifty has gained more than 600 points in 3 trading sessions while the Sensex has scaled up close to 2,000 points in the same period. In addition, even the foreign investors have turned aggressive net buyers in the new year.

The structural indications coming from the advance decline ratio was strongly positive on Tuesday at 35:15 for the Nifty. At the same time the fear index represented by the India VIX edged lower to 16.12 levels. This is indicative of a buy-on-dips idea. Big gainers on Tuesday included PSUs like NTPC, ONGC, Powergrid and SBI. Losses were very localized.

On the positive side, the FPIs were net buyers in equities of Rs.1,274 crore while domestic funds and LIC bought Rs.533 crore of equities on 04-January. In global market trends, Dow was 215 points higher while NASDAQ ended -210 points lower. European markets were up more than 1% but SGX Nifty is showing losses of nearly 40 bps in early trades on 05-Jan.

What is the outlook for 05-January. After a smart rally in the last 3 days, the markets are expected to take a breather. Also the important Fed minutes will be announced on the night of 06-January and that will be critical in setting the tone for the future of monetary policy movement. It is time to be cautious now.