Vigilance Is The Word On The Street

  • Stock Market Analysis
  • Editors Pick

The market continued its momentum in small and midcap stocks while the large caps stocks consolidated ahead of global clues. Indian markets are largely trying to mirror international indices from a directional perspective. Countries such as Taiwan which had the negligible impact of COVID-19 are racing to new highs and developed countries like the UK are still 20-22% lower from their yearly highs on account of local issues and dampened demand revival. Further, it can be inferred that in countries like US, Japan, etc. where government revival packages were colossal ($1-2Tn), stock markets have nearly touched their yearly highs whereas, in countries where the stimulus packages were comparatively petty, the market is seen to be lagging and down nearly 18-20% from their yearly highs. On the contrary, Indian bourses danced to the tune of global optimism and managed to dodge the petty economic stimulus package ($22.50Bn) when compared to developed nations. This optimism in domestic bourses without the onset of structured economic revival policies succinctly suggests that disparity in risk-reward is diminishing for the bulls and investors need to remain vigilant by taking the upbeat sentiments with a pinch of salt.
 
Domestic institutions seem to have played smartly and are currently on a selling spree. They friskily bought during March-April lows and have now been frantically selling in August when markets are in an upbeat mode which indicates their cautious outlook for Indian bourses. Conversely, panicked FPIs were seen selling majorly in March-April and have slowly started investing since then.
 
Bulls are aiding the government to raise small ticket amounts in the form of FPOs. The current optimism in the market is a blessing in disguise for the cash-strapped government to raise money in order to reignite the economic engine. The current rally in PSU stocks might witness a pause given that the government is willing to raise money through FPOs in Indian Railway Catering And Tourism Corp (NS: INIR ) and Hindustan Aeronautics Ltd (NS: HIAE ). A few more FPOs could also hit D-Street in order to raise funds. However, it is advisable that investors remain cautious while associating with any PSUs given that their omnipresent supply overhang makes them vastly unfavorable.
 
Nifty 50 closed on a positive note but experienced highly volatile gap ups and downs during the week. The index is now trading at a confluence zone of trendline resistance drawn by connecting previous pivotal lows and the 78.6 percent Fibonacci retracement of all-time highs to the bottom of 7500. This is a crucial juncture with no participation from index movers and the Banking sector already struggling with its own set of problems and underperformance. The short term trend is still intact and bullish but we believe only a limited upside is left and maintain a cautious view. Immediate support for Nifty is now placed at 11100.

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  • Rishi Rajdev @Rishi Rajdev
    So true !!
    Like 0
    • lalit Mandal @lalit Mandal
      yeah
      Like 0
    • lalit Mandal @lalit Mandal
      yeah??
      Like 0
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