INSUBCONTINENT EXCLUSIVE:
The domestic equity market continued to be buoyant throughout the week gone by, albeit with a kneejerk reaction to the news of the move to
Monthly F-O expiry took all the weaklings out of the market, which has helped cap volatility on the upside for the time being.
Given the
massive rally, Mr Market is now expected to cool down till the beginning of the earnings season
On one hand, FPIs have turned neutral, with sporadic buying of quality names, while the government has started hustling after taking a huge
Rs 1,45,000 lakh crore hit on its annual revenue
The hunt is on to get back the money from other sources; the proof being the revival of some of the past disinvestment agendas.
This would
bring vibrancy to the capital market, but at the same time, suck away liquidity from the bourses, which is a negative for the stock
market.
The race for IPOs has begun
The urgency to raise capital, not only by the government but also by private players, is by far more intense than at any time in the past
IRCTC is a classic example of the government’s hunger for capital
Soon, private sector companies will come forth to claim a share of retail investors’ money.
One can think of subscribing to the IRCTC IPO
given the reasonable valuation, at 19 times earnings, its asset-light model and high earnings visibility
It promises good listing gains.
Event of the weekDebt capitulation is still under way
While many measures have been announced to ease the crisis, the poison of large debt is still oozing
Zee’s debt issue remains unresolved beyond the deadline that the company had set earlier
HDIL capitulated and took PMC Bank down along with it
ADAG Group firms still struggle as the deadlines draw closer, and share prices of Reliance Power, Reliance Infra, Reliance Capital show that
there is pain ahead and it will impact market sentiment.
Technical OutlookNifty50 has begun to consolidate after a massive rally
All short-term indicators have moved to the overbought zone, which has capped the upside for the time being
Short positions have reduced with month-end expiry and, therefore, significant upside is not expected in the near term
A 50 per cent retracement is expected before any rally begins
Traders can go long in the 11,000-11,100 zone.
Expectations for the weekMr Market quickly adjusted itself to the gains from tax cut by
rising 7-10 per cent, while sectorally discounting the tax cut
Hereinafter, the journey forward would happen largely if actual growth returns
One-time tax gains will not trigger any sustained buying in the market
The earnings season would bring cheers, but that could be shortlived unless ground-level consumption pattern improves
Thus, the tax effect should be ignored while assessing the earnings numbers.
Globally, metal prices are correcting sharply but the India’s
listed businesses are rising, creating a negative divergence
Investors should avoid metal stocks for the moment while traders may short for quick gains
Financial stocks and private sector banks should also be avoided as valuations have reached historic higher levels
Paper and breweries are already going north
A similar thing is playing out in the fertilizer space
All in all, investors should wait for a correction in the market before investing afresh.
Nifty50 closed the week 2.1 higher at 11,512.
