Time to stay cautious, book profit with every market upmove
Pessimism surrounding PSBs may slowly turn positive when the recovery bounty begins.
Binani Cement lenders will face zero hair cut which has been acquired by Dalmia Bharat for Rs 6,700 crore through the bankruptcy court. Fast track loan recovery mechanism should eventually recover a good part of approximately Rs 6 lakh crore, which are choking the financial system. However, the current pessimism surrounding the PSU banks should slowly turn positive when the recovery bounty begins.
Events of the week
MOIL has increased the price of magnesium ore by 5-10 per cent. NMDC has regularly hiked the prices of iron ore by 25 per cent in the last two months. Aluminum, copper, zinc and other commodity prices are increased every fortnightly. SBI has increased interest rates on all deposits by 0.5 per cent. Local and global inflation rates are on a rising spree, US Treasury bonds are pointing up on expectations of increase in interest rates. All these factors historically are against the equity bull markets.
In the last week note, we had mentioned that market will test 10,630 levels which it did during the week, following which the fall accentuated. The market is decisively into a correction of long haul. One more bounce is expected, but irrespective of that, another leg of downfall will begin sooner or later. Market will trade range bound for some time, which is the worst time for traders to participate.
Expectation from the week
Market is glued on the global state of affairs currently. The domestic economy has kept the momentum at the ground level, February auto numbers prove that. Maruti, Eicher Motors and Bajaj Auto posted 15 per cent, 25 per cent, 31 per cent YoY growth in their respective vehicle sales numbers, which are encouraging. This should support a bullish case for the market.
Comments of the new US Fed chief were nothing but reiteration of the previous policy stance, which has again rattled the bulls across the globe. Treasury yields are slowly falling after a rapid rise, which should offer some solace to the equities for the time being. But if the yields go beyond 3 per cent for the 10-year US Treasuries, then a massive fall is expected across the markets. It is time to be cautious and wait patiently before investing. Profits can be booked at every rise. The longer term trend is under pressure. Nifty 50 closed the week at 10,458.35, marginally down by 0.31 per cent.