What is your view for Nifty and Sensex for 29th December after the Santa Claus rally has continued in markets?

On 28th December, the Nifty and the Sensex remained in positive territory through the day. While the Nifty 147 points higher at 17,233 levels, the Sensex also closed strong with gains of 477 points at 57,898 levels. The Sensex has now recovered over 1000 points in the last 3 sessions, in what can be referred to as the popular Santa Claus rally.

In terms of market structure, the advance decline ratio was favourable at 48:2 for the Nifty 50 stocks. At the same, the India VIX or the fer index as it is called, edged lower to 16.48 levels on Tuesday as the markets were strong right from the start of trading. The big gainers on Tuesday were defensive pharma and FMCG bets like Sun Pharma and Asian Paints.

After a fairly long time, the global investors turned net buyers, albeit for just Rs.207 crore while domestic funds and LIC bought stocks worth Rs.568 crore on Tuesday. FPIs normally don’t sell heavily towards year end to protect profits on their portfolios. US markets were lower on Tuesday and the SGX Nifty is trading with early losses of about 33 bps on 29-Dec.

For Wednesday, you can expect some volatility with just a day to go for the last expiry of the year. The only risk is if the global investors decide not to roll over their futures positions against arbitrage cash holdings. This may force them to offload the positions in stock cash market holdings and that could upset the markets on Thursday. That is a risk.