INSUBCONTINENT EXCLUSIVE:
The domestic market inched higher during the week gone by, but this time around, midcaps joined the rally and saw a phenomenal runup
The earnings season has set in and the early numbers look encouraging on a year-on-year basis, courtesy the corporate tax cut.
However, the
market seems to be a little sceptic about moving higher ahead of the Union Budget 2020
Signs of a conspicuous rally in the second-rung stocks from across sectors largely signalled that valuations of quality, first-line stocks
have become rich.
This is what is making these second-tier stocks move higher in a so-called valuation catchup rally
This was certainly visible in cement, auto and auto ancillary, financial and metal sectors
It indicates that this leg of the Bull Run is nearing exhaustion and would hopefully last only till Budget.
Among domestic macros, inflation
is raising its ugly head, which will further tie the hand of RBI in further reducing the repo rate
High inflation acts as a deterrent and, therefore, needs to be addressed.
Expectation is that the much-awaited Budget will address these
concerns by debottlenecking supply-side restrictions in agriculture and manufacturing sectors.
Event of the weekAs a matter of statistical
record, our apex court dismisses review petitions almost all the time
The one on AGR faced the same fate
It has certainly created plenty of noise in the market, but it may not have any near-term implications
Bharti Airtel’s strength, which was reflected in its stock price, was a big surprise to many
However, due to its very small public shareholding (191 crore compared with Vodafone’s 803 crore relatively), the stock price did not
witness volatility.
Vodafone Idea’s larger shareholder base caused insane volatility
The lesson here is investors should generally invest in stocks that have relatively low public shareholdings.
Technical OutlookNifty50 is
entering a phase of sideways movement, largely signalling exhaustion on the higher side
Volumes and velocity are muted, giving an indication that the correction could be shallow but longer
In general, the market is in the overbought zone from a medium-term perspective, which can fall on any negative surprises
Traders can buy on decline with stop losses at 12,200 on the Nifty50
If the index falls below 12,200, it can trigger a major correction.
Expectation for the weekThe market is likely to adjust adversely to the
superficial Sino-US Phase-1 trade deal, wherein metals -- including steel stocks -- are likely to witness profit booking
Cement and infrastructure stocks, too, have rallied sharply in anticipation of revival hopes from the Budget, and they are likely to see a
correction.
Auto stocks will come under renewed pressure given the structural slowdown in demand, which is expected to last a little longer
Small industries like paper, shoes, rubber, sugar will witness volatile movements ahead of the Budget on expectation that import duty might
increase in certain categories
On the whole, the market is likely to witness higher volatility but in terms of price, they might move higher before Budget.
Nifty closed
the week at 12,352, up 0.78 per cent.
