The domestic equity market headed higher in spite of all the pessimism surrounding economic growth prospects – India-China border tussle, India Inc’s weak quarterly performance as well as slow demand revival in the economy. ‘Hope’ that things will normalise in next 3-6 months is the single most factor is driving markets higher. At the same time, management commentaries after quarterly earnings, in general, suggest June quarter will be a washout. And the insanely disconnected market seems to have even discounted and assimilated this as one of the darkest quarters in history.

It goes without saying, if the new world order fails to bring about the same level of visibility and demand revival, markets might genuinely react and discount such negative surprises that have currently mesmerized all participants under the all-weather word ‘hope’ that things will eventually improve.

It is, therefore, expected that markets are likely to keep their underlying positive bias at least until Q1FY21 results are announced. However, after the quarterly earnings, markets are expected to correct on seeing big cuts in top line and bottom line numbers, which will then be a good time for investors to buy on declines.

Event of the Week

Reliance Industries was successful in raising nearly Rs 1.70 lakh crore via stake sale in Jio Platforms and through a rights share, a remarkable feat indeed in such a short span of time! RIL, because of its majority weight in Nifty50, has helped the market keep the overall sentiment positive, which helped Nifty rise during the week. Hence, in a way, RIL played saviour for the Indian bourses and kept them afloat as otherwise lower prices would have created a cascading negative effect on the entire market and investor sentiment.

Technical Outlook

After making a big range bar in the week before, Nifty50 reclaimed much of its losses and is now trading at the upper end of the last three weeks’ trading range. However, the occurrence of large long shadows for two consecutive preceding weeks is a sign that sellers are available in this zone. The 10,100-10,500 zone will be a very important resistance for the index going forward, which also coincides with the 61.8% Fibonacci retracement of the recent fall from top to bottom. We expect Nifty50 to move in this broader range going forward and on the downside support is now placed at 9,550.

Expectations for the Week

Given that there are no major events scheduled both locally as well as globally, the indices are expected to consolidate and move sideways during the week ahead. Across the world, markets are trying to decode how the easing of lockdown restrictions will help revive demand. However, the current response seems to be a mixed bag across the world and the foresight remains blurry as to how quickly the revival will pan out.

This signals a long journey ahead, which would ultimately get reflected in stock prices. Stocks are expected to just drag around for some time till clarity emerges on the real economy. Currently, investors are advised to stay away from market or at best cherry-pick frontline stocks in private sector banks, autos as well as metals in small quantities.

Nifty50 ended the week at 10,244.4, up 2.7 per cent.



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