Stock Market

Dull May ahead on D-Street, unless Karnataka outcome lifts the mood

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Authors: Jordan The domestic equity market remained flat with a negative bias during the week gone by.

The US Fed kept interest rates unchanged on Wednesday, but expectation of gradual rate increases remained.

The week was lightened up with strong sales numbers from auto firms, which maintained a double-digit growth rate with Tata Motors posting 84 per cent YoY growth, Ashok Leyland 79 per cent, indicating that the macro setup is firming up on the ground and consumer spending remains a strong force in driving growth. However, commercial vehicles growth seems like a one-off event, as such massive growth is unlikely to sustain for long.

This sudden one-time demand may be due to the logistics sector’s adjustment to the new GST regime. Shares of PC Jeweller tanked by a whopping 65 per cent in last four weeks (from April 2 to May 2).

This stock is a big lesson for long-term investors that stop losses are important in investing.

Sometimes numbers, management commentaries and media may not show the true picture, but stock prices do.

Investors should have protective stop losses in order to manage portfolio risks.

Buy and hold may be good in theory but risk management is a practical lesson. Event of the weekThis week witnessed a slump in aviation stocks, the biggest in recent history.

At last, reality dawned on the aviation sector, which was trading with lofty valuations.

Certain industry-specific factors have been hampering growth.

Airports in tier-I cities have limited capacity and infrastructure to handle an additional pipeline of scheduled flights.

This capacity constraint along with jet fuel prices would be a huge setback for the aviation players causing a dent to their bottom-line. Technical OutlookThe upward rally of nearly a month has come to an end, and this weakness was evident on the MACD oscillators, which have been indicating loss of momentum.

A divergence between price rise and loss of upward velocity was evident over the past few days.

Finally, when the trend line was broken it generated signals of a corrective fall.

Nifty50 could find support in the 10,200-10,300 range.

Traders should initiate long positions only at lower levels. Expectations for the weekThe market is still in a corrective mode.

Earnings will not make any material impact on the stocks and markets, but the outcome of Karnataka elections will be a crucial event to watch out for. Markets can still be predicted but no one can really foresee the election outcome.

Thus, investors will have to wait and watch! On the sectoral front, realty, pharma, power, oil gas, metals, cement are expected to continue correcting but one can expect profit booking at higher levels in IT and FMCG stocks. On the whole, May will be a lacklustre month unless election results become a big market driver. For the week gone by, Nifty50 closed at 10,618, down 0.57 per cent.




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