| Time for Bulls to be Vigilant |
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| During the week, 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 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. |
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| 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. Ahh! FOMO or Recency bias for FPIs?? |
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| Event of the week |
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| 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 government is willing to raise money through FPOs in IRCTC and Hindustan Aeronautics. 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. |
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| Technical Outlook |
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Nifty50 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.
Expectation for the week |
| | Going ahead, Mr. Market will take cues from profound theatrics happening in the US. Given that presidential elections in the US are exactly 73 days away, markets across the globe will hold on to important news from the presidential campaigns. India Inc.'s result season is over and as expected Q1FY21 was largely considered a one-off dark quarter. Markets reacted maturely but now it is keeping an eye out for the upcoming quarters which may really show the impact of COVID-19 on its sectors and stocks. But that is still some time away wherein markets might resort back to aggression looking at Q2 numbers. Investors are advised to remain on the sidelines and may look to book profits. However, momentum in small & midcap stocks is still strong but gives no promise to continue in the future. It is time to be cautious and have decent liquidity on a portfolio level. Nifty50 closed the week at 11371.60, up by 1.7%. |
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