INSUBCONTINENT EXCLUSIVE:
The markets were in for a rollercoaster ride during the week gone by with negative sentiments running across the media giving a feeling that
markets will collapse, but that seldom happens.
Newspapers are filled with fearful headlines like “Rupee could see a new low; Trump
tariffs give a bear hug; One-third of emerging markets in bear territory.”
In this kind of fear psychosis, irrationality makes investors
But these are times to accumulate quality stocks rather than sell them
Is it too late to sell now Following the crowd when everyone is selling is an incorrect strategy and the time to sell has gone when the
market has already slumped
It is time to accumulate.
Trump’s rhetorics – “Increase in shrimp export duty; embargo on Iran oil; Trade war with China, EU, Mexico
and Canada – have caused jittery and an ambiguous business environment, which have impacted valuations in the market.
But it is only when
the prices come down that investors can take the opportunity to accumulate a quality portfolio of stocks
Because whenever fear has been created by whatsoever reasons, that has always been a buying opportunity.
Events of the WeekThis week,
margins were increased on certain volatile stocks, which added more fuel to the fire, leading to a sudden selloff in midcaps and smallcaps
However, this will not sustain going forward and things will settle down soon
Among specific stocks, Tata Motors was in news after the company announced plans to invest Rs 1.2 lakh crore in JLR in next three years
This was the biggest capex plan in its history and the sentiment towards ths stock has been negative, as the company hasn’t been
generating sufficient free cash flow and returns and has been infusing more money into JLR aggressively.
Such massive capex does not augur
well for long-term investors in the stock
Technical OutlookThe Nifty50 made a V-shaped recovery on its intraday charts after a panic fall, which indicated that the market has
stabilised and a bottom is in place for the immediate term
In the weekly chart, a hammer pattern has formed, suggesting that the correction phase will be tighter and a sideways movement is likely to
emerge.
Time correction, and not price correction, is the likely scenario
Traders can go long at lower levels with a stop loss at current weekly low in individual stocks, which have fallen hard as such positions
are expected to generate higher returns on capital deployed
Expectations of the weekThe markets seem to have been left with very little cushion for further fall
Although crude oil prices are on a sudden uptrend, NY gasoline prices are way below the highest levels
This divergence more often than ever does not work
This indicates that crude prices will eventually fall and stabilise at lower levels.
Also, the rupee too will stabilise soon, as RBI has
been continuously intervening and trying to cool the market
The rupee has been down by almost 9 per cent in last six months and there is very little room left to go beyond these levels in the medium
The market is likely to pull back
Hence, selective investments can be made in quality stocks
Investors sitting on the sidelines should start buying
The Nifty50 closed the week 0.99 per cent lower at 10,714.
