MOUNT 16K DONE, WHAT NEXT? Tuesday was a momentous day for In | Anuj Singhal CNBC Awaaz Managing Editor

MOUNT 16K DONE, WHAT NEXT?
Tuesday was a momentous day for Indian markets with the bulls finally managing to cross the 16,000 mark and closing above it with a flourish after testing that mark almost 5 times in July. And as it happens many times, the FIIs have come to the party after sulking for last 2 weeks with a big buy number in both cash and futures markets. Now, the obvious question is what next?

This market has exhibited a classical pattern. The market breaks out, then consolidates, takes a step back while the midcaps outperform and then the large caps bounce back. In the past whenever Nifty has broken out of a trading range, it has added 500 points in a fresh expansion, so it’s logical to now expect a move towards 16,500. What could lead it? If yesterday was any indication, the Bank Nifty might be willing to finally put its hand up. It’s an index which has massively underperformed the Nifty during the last 1000 point run but yesterday closed above the 20 and 50 DMA. The key today would be SBI’s numbers.

Another thing that could happen now is that large caps could play some catch up. This year, the Nifty is up 15% while the Small Cap Index is up 49%. While one swallow doesn’t a summer make, but yesterday the Small Cap Index ended in red and could that be an indication of things to come in near term? Let’s see

TRADE SETUP
Bulls finally conquer 16,000, fresh expansion starts
FIIs back on buy side after long selling spree
FIIs net buy Rs 2116 cr in cash markets
Index futures: FIIs add 19,000 longs, cover 12,000 shorts
Anecdotally, Nifty adds 500 points on fresh expansion
Possible to now see a sharp move towards 16,500
Bank Nifty in focus, can it correct underperformance?
Bank Nifty managed to close above 20 and 50 DMA

MIDCAPS OR LARGE CAPS?
Index This month This year
Nifty 2.3% 15.3%
Nifty Midcap 1.6% 35.6%
Small Cap 0.6% 49.4%

MIDCAPS OR LARGE CAPS?
The first phase of fresh expansion is usually in large caps
Large caps now might play some catch up to midcaps
Small Cap Index was down yesterday