INSUBCONTINENT EXCLUSIVE:
The domestic stock market’s behaviour during the week seems to indicate the beginning of its first leg of a new bull market
Massive buying emerged in smallcap and midcap stocks, which spilled over to largecaps, which indicated that green shoots of a new bull
market are slowly getting visible, considering that the upward movement was very sharp and quick
Nonetheless, swift profit booking and corrections are bound to occur going ahead
Moreover, global economic scenario doesn’t look very encouraging as ECB has just changed its stance from hawkish to dovish
This means the European economy is likely to show suboptimal growth, which doesn’t augur well for the global economy.
There seems to be no
end to the Sino-US trade war
Although the details are still under the wraps, Huawei’s intent of taking on the US government head on is a hidden signal that relations
between the two superpowers are not amicable
This does not spell good for global equity markets and Dalal street will also be in no hurry to move ahead
It would drag and correct till the election outcome.
Event of the WeekThis being an election year, the middle and lower strata of society
were the receivers of bountiful benefits from the government, which may look pleasing at first instance but the axe is likely to fall on the
full-fledged budget of the new government.
Direct tax collections for FY19 were estimated at Rs 12 lakh crore but in the first nine months,
the collection is just Rs 8 lakh crore
Some estimates show the shortfall is likely to be of Rs 1 lakh crore by the close of the year
Such deficit is unseen in the recent past
Larger repercussions lay ahead for the economy in terms of government borrowing, the interest rate cycle and the government’s ability to
spend on infrastructure, which will adversely affect the equity market in the second half.
Technical OutlookNifty50 is facing resistance at
the upper channel of the trendline
The undercurrent of the market is still sideways, which can be seen from the flattish slope of the trend lines
Since the market is facing resistance at the upper end of the trend channel, a correction is expected to 10,900 levels on Nifty50
The formation of small bodies in price action charts also indicated exhaustion, but a spike above the resistance levels and then a fall will
confirm that the upward move has ended for the time being and the market can go back to 10,900 level, and in the worst case scenario, up to
Traders can initiate shorts on every weakness
Expectations for the WeekMr
Market is mesmerized in the hope that the ruling Government has increased its chances of forming a strong Government and expectations of a
coalition Government are receding, but in politics anything is possible before the actual outcome
Just like Bloomberg’s fear and greed indicator for the stock market, politics is guided by sentiment of expectation of a stronger
Government or coalition Government which will oscillate the markets accordingly
However, reasons can emerge which may again shift the opinion of the market towards formation of a weaker Government coming to power; the
markets will drift lower in that scenario
Therefore, investors are advised to stay on the sidelines and keep ready a war chest of money to be invested in good quality small and
midcap shares after a correction
Also, allocation to frontline stocks should be made at or around the election month for building a portfolio at reasonable valuations
Nifty 50 closed the week at 11035, up by 1.58%.
