Will Sensex rally 1,000 points next week?

It has been a historic week for the markets, the best ever. A 1000-point rally on the Sensex, that is almost 7% and the Nifty has also just cruised to 4,800 and beyond that. It has been a phenomenal week, not the kind of week that we see very often, and dotted in the middle of the week, is that fantastic Wednesday. It was the biggest day ever in our markets for a single session of gains.

As you look back at this week, it has been a truly tremendous performance. On the last day, we saw some traces of euphoria actually building up. Before that, there was not so much of it, Wednesday we saw that big blowout, the complete breakout of that old high range and on the last trading day of the week, while the Sensex only put on 200 points, and the Nifty had a 100-point rally, what we had not seen are the kind of blowouts we saw in stocks like RNRL, RPL and the week has been dotted with these spectacular performances.

Amazing build-up on the futures and options and the stock rallies 12-15%. We have seen it consistently for the last three days. Two days back, it was sugar when most sugar stocks rallied 20%+ in a single session. Yesterday it was the real estate sector where the large cap stocks like DLF, Unitech, rallied 10-12%. Today, it was the turn of some of the Reliance Group stocks like RNRL, up 35% for the day, RPL a 12% rally. That is the extent of the blowout we have seen in some of the stocks.

It is all happening on very large volumes. It is not thin volume trade at all. So, you cannot say it is a shallow market, which is why prices are moving very fast. It is far from it. Today, we have seen overall volumes of Rs 100,000 crore and while we are close to settlement we are not exactly in the penultimate or ultimate day of expiry where volumes tend to pick up very sharply. We are still five days away from settlement and to see Rs 100,000 crore is almost historically high, if not the highest for this time of the month, it has been quite spectacular.

Curiously, while there have been blowouts in individual stocks, we have not seen very positive market breadth. In fact today on a day like this when so many stocks did so well, we had more declining than advancing stocks and even the midcap and small cap indices were up just about 1%, which is quite average. But if you chose the right stock, you could have been 8-10% and there were plenty of examples of that.

On the one hand it is happening outside the index. But even the index is doing very well. Index stocks are doing very well, with the exception of technology. Technology stocks, many of them hit 52-week lows today, just in the last half an hour of trade, because the market had entered a euphoric kind of zone, we saw pullbacks and sharp ones at that in many of the tech stocks.

But outside the technology basket, we saw some really meaningful rallies in Reliance Energy, which has been a darling of the market. Some of those auto stocks continued to rally, today was Hero Honda’s turn, SAIL had a fantastic session. Hindustan Unilever and SBI, both looked very smart. So, it is not as if nothing is happening inside the index. It is probably getting a bit shadowed by one large component, which is technology.

Outside the index of course there is no such problem. RNRL, we spoke about, RPL, JP Hydro had a very big rally today at 15%+, some of those fertiliser stocks like Chambal, Nocil were going great guns today, PTC had a good 10% kind of move, TTML had a blowout, Petronet was up 8% and sugar had a very volatile kind of session, up and down. It is not settled, there are divergent views on sugar of course, which is why the sector is quite volatile.

But if you are focused on individual stocks, it has been quite an eye-popping kind of Friday and it sets the stage very nicely for Monday, because we are going into expiry week with these absolute blowouts happening in individual stocks, with the index at an all-time high and with everybody talking about 17,000 as a fairly real and imminent possibility.

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#Udayan Mukherjee #Sensex #16000 level #analysis