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When it looked like nothing could derail Indian markets, a confluence of factors including the Middle East war and China stimulus have come as big blows. Do you see Nifty’s 4% decline ending last week or should investors brace themselves for deeper cuts?
Domestic markets witnessed a sharp correction last week, with the benchmark indices Nifty correcting by over 4%, with both the major heavyweights in the index, Reliance and HDFC Bank, correcting by almost 9% and 5.4% respectively.
With middle east tensions showing no signs of cooling off, investors, both local and global, appear to be concerned about the fallout of any escalation in the conflict, leading to a spike in crude oil prices and an 18% rise in the India VIX, also referred to as the Fear Index, WoW.
Post last week’s market correction, we could expect a consolidation in the indices, but it appears that bears are currently holding the upper hand from a short-term perspective. Any further spike in India VIX, could be a cause of concern in case it stays above the 20 mark.
However, a stronger than expected US non-farm payrolls data for the month of September at 250k, bodes well for the markets, but at the same time, this could also mean a lower probability of rate cut by the US Fed, in the near future, given the receding fears of a US recession in the near future. However, investors need to remain cautious and alert in the coming week.What are the important levels for Nifty and Bank Nifty for this week?
Post the all-time Nifty high of 26,277 hit on September 27, the benchmark index has corrected by almost 1,300 points, to marginally end last week, a tad above the 25,000 mark. With the shorter-term trend remaining down, Nifty on the downside has crucial support around the 24,500-24,600 zone whereas resistance is seen around the 25,450-25,550 zone. Bank Nifty, which again is down by over 4% last week, has crucial support around the 50,300-50,500 zone whereas resistance is seen around the 52,600-52,800 zone.
How serious is the threat of FIIs moving to China and would you advise investors to wait and watch or buy on every dip?
With the FIIs selling over 30,000 crores worth of shares in October itself, and a spectacular rally in the Chinese markets, with the leading Chinese benchmark indices up by almost 30%, from its recent lows, appear to have enthused the FIIs to relook at their Chinese investments.
The underperformance of the Chinese markets for a very long time, the over-valuation or expensive valuation across many sectors in India, and a positive trigger of stimulus packages announced by the Chinese over the year including last week’s, amounting to almost a 1 trillion dollars (almost 6% of China’s GDP), could be one of the largest in China’s history. However, India is definitely the place of action over the next couple of decades and all major FIIs will definitely want to be part of this action.
RBI MPC and TCS’ Q2 earnings would be two big events this week. What are your expectations on both these fronts?
Post the sharp 50 basis points rate cut by the US Fed, expectations run high of similar action by other central banks around the world, but at the same time, with the RBI MPC meet later this week, investors are low on expectation of any rate cut by the RBI, as inflationary concerns continue to remain on the top of the mind of the RBI.
Further, concerns with regard to flare up in crude oil prices is also a key data point that would be closely watched by the RBI going forward. Investors are keeping a close watch on upcoming TCS’ Q2 earnings which are expected to be tepid, given the softness in the US & European economies. However, the recent US jobs data is positive but it is to be seen whether such strong performance is repeated in coming months, as the Indian IT sector is heavily dependent on the overall strength and growth of the US economy.
Private Banks were severely beaten down this week after having a good run for more than a month now. What would be your advice to investors?
Most of the major private sector banks, including the likes of HDFC Bank, ICICI Bank, AXIS Bank, IndusInd Bank & Kotak Bank, witnessed a sharp correction last week on the back of sell-off on investor concerns regarding Middle east tensions and FIIs selling. Those investors having a long-term investment perspective spanning 5-7 years or more, should ideally look at a stock SIP mode as the banking sector and most of these banks will play a very crucial role in India’s growth story. But at the same time, investors should adopt a diversification perspective to reduce over-reliance on any one sector.
BSE and NALCO grabbed eyeballs with big rallies while Macrotech Developers, Honasa Consumer and Adani Green were among the worst losers? What should investors do with them?
Investors can hold onto BSE from a long-term perspective while those having a short-term view, should look at booking profits both in BSE & NALCO, given the sharp appreciation in prices witnessed over the past few weeks. The strong rally in the Chinese markets have helped support metal prices and that’s the rub-off effect on the domestic metal companies.
On the losing side, Macrotech, Honasa & Adani Green, witnessed a sharp correction, but at the current levels, investors can hold onto their positions. However, any sustained break below the recent low of last week, could trigger the next round of selling pressure else the stocks could get into a consolidation mode. In such a scenario, any pullback can also be looked at as an exit opportunity, because technically, a top has been made on the charts for these stocks.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)