INSUBCONTINENT EXCLUSIVE:
The domestic equity market is witnessing a whipsaw phase, which did not allow the bulls nor the bears to make any headway through the week
This is typically a corrective phase, which the market is undergoing after witnessing a strong rally from 10,600 right up to 11,800, which
is now being corrected.
Statistically, similar corrections in the past have taken around a month’s time
Therefore, the current corrective phase has just begun and it should last till the middle of May
However, the undertone of the market will not be weak.
The amount of price correction would be difficult to estimate, but time-wise the
market is likely to take its own sweet time till May to correct.
The earnings season will bring in some amount of volatility, but that too
would be restricted to either intraday or at best till the next day before the impact settles down
Nonetheless, the undercurrent will be of the corrective nature and Indian bourses will continue to remain boring
Traders should ideally avoid analysing the market in the current phase, but instead analyse elections.
Event of the weekThe US Department of
Justice has finally booked five of India’s top pharma companies out of 18 global players in price cartelisation for selling pharma
generics in the years 2012-17
One may recollect that companies like Sun Pharma and Aurobindo Pharma had their best run-up in prices as profits and revenues surged
For example, one of the companies had reported CAGR growth of 25 per cent in top line during this period, whereas currently pharma growth
Potentially, the penalties can go up to a few $100 million, which currently the market has not priced in, but soon these companies will
have to shell out the abnormal profits that they had made back to the US Government
Currently, there is no point betting on pharma companies till these cases are concluded.
Technical outlookNifty50 is consolidating in the
11,600- 11,700 range and showing strength on every decline
However, since the prices have broken the upward moving regression trend channels, the bullish impulse is over and prices will correct from
here on, although the deteriorating prices may not be significant, time correction will be longer.
Buy on decline should be strategy for
traders with proper stop losses in place
One should look to buy stocks trading near the lower price supports rather than buying into breakouts, because many false breakouts may be
experienced in such times
Expectations for the weekMarkets will continue to be lacklustre, although some of the corporate numbers will inject steroids to an
The IT index has made a triple top, which suggests the prices are not going to rise in a hurry
Howsoever, earnings of the IT giants although slightly better than expected, will not move into new price territory given the high
valuations and the high expectations built in.
Also, prices of metals such as aluminium and copper are likely to witness further pressure
and, therefore, metal stocks should be avoided
Traders can initiate short bets.
Nifty 50 closed this week 0.19 per cent down at 11,643.
