The domestic equity market traded with slightly positive bias at the start of the week but eventually gave up all the gains by the end of it. We had mentioned last week that “exhaustion was visible in many sectoral indices” although the Nifty glided a little higher for a while but embraced reality as peer sectoral indices had already turned lower.
The fall in the Nifty was in line with the general decline in the market, which had already started prior to Nifty’s fall. Sometimes, Nifty may not be a true indicator of market pulse.
In times of good news, when the market refuses to go up, this in itself is the biggest indicator as to where Mr Market is heading. The Trai proposed lowering of IUC from 14p to 6p in a big boost to Reliance Industries’ profitability by approximately Rs 2,000 crore, but guess how the market behaved? Reliance briefly made a new high but cracked by the close of the day.
The government imposed anti-dumping duty on tyres, giving some direct benefits to the tyre companies, but after opening higher, all tyre stocks came off the highs by the close.
All this indicates one thing, irrespective whether domestic mutual funds are flushed with funds or corporate numbers are still good, Mr Market is refusing to go up and this indicates that it has entered a phase of deeper correction. Events of the Week The government is preparing a stimulus package of approximately Rs 50,000 crore to boost the economy. If this is what the government feels that the
economy is ailing and requires medicine, then why can’t market participants see that? Is the Nifty50 at 10,000 a mirage? If the government assessment is right, then the market staying at new high is an illusion. Someone is drastically wrong. Maybe the government is right after all, as it has all the data to analyse!
Technical Outlook
The market has decisively reversed after making a double top in the short term. This was obvious given the fact that it was witnessing the slowest ascent since last three weeks in the entire time frame of this seven-month rally. The velocity of the uptrend was the weakest since December 2016.
The fall has accelerated and Nifty50 is likely to find first support at 9,700.
The oscillator was sending out a signal about an impending fall loud and clear. Longs should be avoided for now for trading purposes and traders may sell on rise.
Expectations for next week
The market indeed took the Fed’s $4.5 trillion balance sheet shrinking exercise seriously. This will eventually scoop up the helicopter money, although the pace will be slow initially, but will sooner or later puncture the global liquidity bubble. This is the biggest threat to the bull markets across the globe.
GST implementation has really created major hiccups across business processes. It is estimated that exporters refund to the tune of Rs 65,000 crore is pending, which has led businesses to standstill due to lack of working capital.
The government is postponing the return filing dates due to one reason or the other, but ultimately businesses are suffering. No wonder statistical evidence that out of every 10 countries where GST type laws were implemented, the growth rate shrank between 0.7 per cent and 1 per cent of the GDP in seven. There is every reason now to believe that India too will follow the same path of slow economic growth in the near term.
SBI Life’s IPO barely managed to sailBSE -5.16 % through, indicating bearish sentiment in the primary market. Below-par listing gains of Matrimony.com frightened many investors, but in a way, this will have a good side effect that new IPOs will henceforth be fairly priced, leaving some money on the table for investors.
SBI Life’s IPO was priced at a PE of 70, which was outrageous, whereas other listed peers were trading at 40 PE. We have been cautioning investors for a month now to stay on the sidelines. Not investing in euphoric times is a pre-requisite for generating above-average returns. All the fund managers were selling the India story, but we kept our readers away from putting in fresh funds. The Nifty50 closed the week at 9,964, down 1.20 percent
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